<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 6, 1996
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
WESLEY-JESSEN HOLDING, INC.*
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
DELAWARE 3851 36-4023739
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
333 EAST HOWARD AVENUE
DES PLAINES, ILLINOIS 60018-5903
(847) 294-3000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
KEVIN J. RYAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
WESLEY-JESSEN HOLDING, INC.
333 EAST HOWARD AVENUE
DES PLAINES, ILLINOIS 60018-5903
(847) 294-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES OF ALL COMMUNICATIONS, INCLUDING COMMUNICATIONS SENT TO AGENT FOR
SERVICE, SHOULD BE SENT TO:
DENNIS M. MYERS, ESQ. DAVID B. WALEK, ESQ.
KIRKLAND & ELLIS ROPES & GRAY
200 EAST RANDOLPH DRIVE ONE INTERNATIONAL PLACE
CHICAGO, ILLINOIS 60601 BOSTON, MASSACHUSETTS 02110
(312) 861-2000 (617) 951-7000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list of the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED PRICE(1)(2) FEE
- -------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, par value $0.01 per share... $57,500,000 $17,424
- -------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(1) Includes shares that the Underwriters have the option to purchase
from the Selling Stockholders to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a).
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------
*The Registrant intends to change its name to Wesley Jessen Vision Care,
Inc. prior to the completion of the Offering contemplated hereby.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
WESLEY-JESSEN HOLDING, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING LOCATION IN
PROSPECTUS OF INFORMATION REQUIRED BY ITEMS OF PART I OF FORM S-1.
<TABLE>
<CAPTION>
REGISTRATION STATEMENT
ITEM NUMBER AND CAPTION CAPTION OR LOCATION IN PROSPECTUS
----------------------- ---------------------------------
<S> <C>
1.Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus....... Outside Front Cover Page of Prospectus
2.Inside Front and Outside Back
Cover Page of Prospectus....... Inside Front Cover Page of Prospectus;
Outside Back Cover Page of Prospectus;
Additional Information
3.Summary Information, Risk Factors
and Ratio of Earnings to Fixed
Charges ....................... Prospectus Summary; Risk Factors
4.Use of Proceeds.................. Prospectus Summary; Use of Proceeds;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations
5.Determination of Offering Price.. Outside Front Cover Page of Prospectus;
Underwriting
6.Dilution......................... Dilution
7.Selling Security Holders......... Principal Stockholders
8.Plan of Distribution............. Outside Front Cover Page of Prospectus;
Underwriting
9.Description of Securities to Be
Registered..................... Prospectus Summary; Dividend Policy;
Capitalization; Description of Capital
Stock
10.Interests of Named Experts and
Counsel........................ Legal Matters
11.Information with Respect to the
Registrant..................... Outside Front Cover Page of Prospectus;
Prospectus Summary; Risk Factors; The
Company; Use of Proceeds; Dividend Policy;
The Reclassification; Capitalization;
Dilution; Selected Historical Consolidated
Financial Data; Management's Discussion
and Analysis of Financial Condition and
Results of Operations; Business;
Management; Principal Stockholders;
Certain Transactions; Description of
Certain Indebtedness; Description of
Capital Stock; Legal Matters; Experts;
Index to Financial Statements
12.Disclosure of Commission Position
on Indemnification for
Securities Act Liabilities..... Not Applicable
</TABLE>
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED DECEMBER 6, 1996
PROSPECTUS
SHARES
[Logo] WESLEY JESSEN VISION CARE, INC.
COMMON STOCK
-----------
All of the shares of Common Stock, par value $.01 per share ("Common Stock"),
offered hereby (the "Offering") are being offered by Wesley Jessen Vision Care,
Inc., a Delaware corporation ("Wesley Jessen" or the "Company"). Prior to the
Offering, there has been no public market for the Common Stock of the Company.
It is currently anticipated that the initial public offering price will be
between $ and $ per share. See "Underwriting" for information
relating to the factors to be considered in determining the initial public
offering price of the Common Stock.
Application will be made for inclusion of the Common Stock on the Nasdaq
National Market under the symbol " ."
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share
. . . . . . . . . . . . . . . . . . . . . . . . . $ $ $
- -------------------------------------------------------------------------------------------------------------
Total (3)
. . . . . . . . . . . . . . . . . . . . . . . . . . $ $ $
- -------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) The Company and certain stockholders (the "Selling Stockholders") have
agreed to indemnify the several Underwriters against certain liabilities,
including certain liabilities under the Securities Act of 1933, as amended.
See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Selling Stockholders have granted the several Underwriters an option,
exercisable within 30 days after the date hereof, to purchase up to
additional shares of Common Stock solely to cover over-
allotments, if any. If such option is exercised in full, the total Price to
Public, Underwriting Discount, Proceeds to Company and Proceeds to Selling
Stockholders will be $ , $ , $ and $ , respectively.
The Company will not receive any of the proceeds from the sale of the
shares of Common Stock by the Selling Stockholders. See "Underwriting."
-----------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, subject to
approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
delivery of the shares of Common Stock will be made in New York, New York on or
about , 1997.
-----------
MERRILL LYNCH & CO.
ALEX. BROWN & SONS
INCORPORATED
BT SECURITIES CORPORATION
----------- SALOMON BROTHERS INC
The date of this Prospectus is , 1997.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
<PAGE>
[Sample advertisement used by the Company to promote several of its lenses
including its FreshLook cosmetic and Precision UV premium contact lenses.
Aquaflex(R), CSI Clarity(R), CSI(R), DuraSoft(R), DuraSoft 2, DuraSoft 3,
DuraSoft Optifit, Elegance, FreshLook(R), Gentle Touch, Hydrocurve, Hydrocurve
II(R), Natural Touch, Optifit, Optifit Custom, Polycon(R), Precision UV,
SoftPerm(R), Wesley-Jessen(R) and WJ(R) are trademarks of the Company and its
subsidiaries.
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by more detailed
information and financial statements and notes thereto included elsewhere in
this Prospectus. Unless otherwise stated, the information contained in this
Prospectus: (i) assumes no exercise of the Underwriters' over-allotment option;
(ii) reflects a -for-one stock split of the existing Common Stock and
Common Stock equivalents; and (iii) reflects the reclassification of all
classes of capital stock into shares of Common Stock. See "The
Reclassification." Unless otherwise stated in this Prospectus, references to
(i) the "Company" or "Wesley Jessen" shall mean Wesley Jessen Vision Care, Inc.
(formerly known as Wesley-Jessen Holding, Inc.), its consolidated subsidiaries
and their respective predecessors; (ii) the "Predecessor" shall mean the
operations of the Wesley Jessen division of Schering-Plough Corporation prior
to the acquisition thereof by Bain Capital, Inc. ("Bain Capital") and
management on June 28, 1995 (the "Wesley Jessen Acquisition"); and (iii)
"Barnes-Hind" shall mean the contact lens business of the Barnes-Hind division
of Pilkington plc prior to the acquisition thereof by the Company on October 2,
1996 (the "Barnes-Hind Acquisition"). Statement of operations data presented
herein on a pro forma basis give effect to, among other things, the Barnes-Hind
Acquisition and the other transactions related thereto as if the Barnes-Hind
Acquisition and such other transactions had occurred on January 1, 1995. See
"Unaudited Pro Forma Financial Data."
THE COMPANY
Wesley Jessen is the leading worldwide developer, manufacturer and marketer
of specialty soft contact lenses. The Company's products include cosmetic
lenses, which change or enhance the wearer's eye color appearance; toric
lenses, which correct vision for people with astigmatism; and premium lenses,
which offer value-added features such as improved comfort for dry eyes and
protection from ultraviolet ("UV") light. The Company offers both conventional
contact lens products, which can typically be used for up to 24 months, and a
broad range of disposable lenses, which are intended to be replaced at least
every two weeks. Founded in 1946 by pioneers in the contact lens industry, the
Company has a long-standing reputation for innovation and new product
introductions. The Company was acquired by Bain Capital and management in June
1995, and in October 1996 the Company strengthened its product, technology and
distribution capabilities through the acquisition of Barnes-Hind. For the
twelve months ended September 28, 1996 ("LTM"), the Company's pro forma net
revenues were $243.8 million and its pro forma operating profit was $22.5
million.
The contact lens industry is large and rapidly growing. In 1995,
manufacturers' sales of contact lenses worldwide totaled $1.8 billion,
representing a compound annual growth rate of 11% from $1.1 billion in 1990.
According to industry analysts, the U.S. market for contact lenses is expected
to grow by approximately 10% per year through the year 2000. The Company
believes that market growth outside the United States will likely exceed
domestic growth because of lower contact lens penetration rates
internationally. Future growth in the contact lens market is expected to result
from (i) continued increases in the number of wearers, as more people use
contact lenses as an alternative to eyeglasses, and (ii) increased revenues per
wearer, as specialty products and disposable lenses grow in popularity. Because
the hard contact lens portion of the industry is relatively mature, the Company
expects that most future growth will occur in the soft lens portion, which is
comprised of the clear lens segment (lenses that do not provide value-added
features) and the specialty lens segment.
The Company operates primarily in the specialty segment of the soft lens
market, where it has the leading share in each of the cosmetic and premium lens
segments and the second leading share in the toric lens segment. The Company
has the leading position in the specialty segment of the soft lens market as a
whole, which accounts for one-third of industry sales volume and is projected
to grow at approximately 15% per year through the year 2000. In recent years,
in both the clear and specialty lens segments, there has been a pronounced
shift in consumers' preferences toward disposable lenses and away from
conventional lenses, which has led to a significant increase in contact lens
expenditures per wearer. The Company estimates that currently more than 35% of
U.S. soft lens wearers use disposable lenses, up from 21% in 1992. The Company
believes that its leading portfolio of disposable specialty lenses has
positioned it to benefit from the preference shift toward disposable lenses.
The Company also offers a complete line of conventional and disposable clear
lenses, which are positioned as companion products to the Company's cosmetic
lenses.
According to an independent research firm, more than 70% of all contact lens
prescribers in the United States offer the Company's products, which permits
the Company to rapidly launch new categories of products.
3
<PAGE>
Wesley Jessen develops technology, manufacturing processes and products through
a combination of its in-house staff of more than 50 engineers and scientists
and Company-sponsored research by third-party experts. The Company markets and
sells its products (i) to consumers through the second largest advertising
campaign in the industry and (ii) to eyecare practitioners through its 180-
person salesforce and network of 60 independent distributors, which together
sell the Company's products in more than 75 countries.
Wesley Jessen believes that several characteristics of the contact lens
industry, in addition to its projected growth, make it an attractive market for
the Company to serve. First, because the need for corrective eyewear is
chronic, contact lens wearers typically replace their lenses regularly over an
extended period of time. Second, contact lens wearers frequently repurchase the
same brand of lenses. The Company believes this occurs because a doctor's
prescription is required for a change in lenses (including a change in brands)
and eyecare practitioners are reluctant to change the contact lens brand of a
satisfied wearer. The combination of customers' need for repeat purchases and
their brand loyalty provides a recurring revenue stream for established lens
manufacturers such as Wesley Jessen. Third, to compete successfully in the
contact lens industry requires, among other things, (i) a significant
investment in sales and marketing in order to persuade wearers to switch to a
new product; (ii) the development and cost-efficient application of
sophisticated manufacturing processes required to produce contact lenses; (iii)
U.S. Food and Drug Administration ("FDA") product clearances; and (iv) a patent
portfolio covering materials, design and processes. As a result, no new
significant competitors have entered the soft contact lens industry in the last
ten years.
The Company believes it has achieved its leading worldwide market position in
specialty soft contact lenses because of the following competitive strengths:
. HIGH-QUALITY BRANDED PRODUCTS. Wesley Jessen produces a broad range of
high-quality contact lenses that meet customers' demand for improved
cosmetic, comfort, ease-of-care and vision-correction features, and are
sold under brand names recognized by ophthalmologists and optometrists
worldwide.
. SUCCESSFUL DEVELOPMENT AND INTRODUCTION OF NEW PRODUCTS. The Company has
a strong track record of developing new specialty contact lens products,
with the five new product lines introduced since 1994 accounting for 25%
of the Company's pro forma net sales in the LTM period.
. BROAD PATENT PORTFOLIO. Wesley Jessen believes that its intellectual
property, including more than 70 U.S. patents in product design,
materials and manufacturing processes, make imitation of the Company's
products difficult, supports the Company's strong gross margins and
provide the Company with a competitive advantage.
. ESTABLISHED SALES AND DISTRIBUTION NETWORK. The Company believes its
salesforce and distributor network constitute the largest and most
sophisticated sales organization in the specialty contact lens segment.
The Company's salesforce has focused on developing strong relationships
with eyecare practitioners by not only serving their product needs but
also offering them opportunities to increase profitability and build
their practices through the sale of the Company's value-added products.
. STRONG INTERNATIONAL MARKET PRESENCE. On a pro forma basis, Wesley
Jessen derives more than 40% of its net sales from sales outside the
United States, and the Company's specialty contact lens products have
leading market shares in Europe, Japan and Latin America.
. LOW-COST, PROPRIETARY MANUFACTURING CAPABILITIES. The Company produces
substantially all of its contact lens products in four state-of-the-art
manufacturing facilities, which apply proprietary technology, allow the
Company to be a flexible, low-cost manufacturer of specialty lenses and
have excess capacity sufficient to meet the Company's rapidly growing
needs for several years.
. EXPERIENCED MANAGEMENT WITH A PROVEN RECORD OF IMPROVING PROFITABILITY.
The Company's senior management, who on average have more than 10 years
of experience in the contact lens industry, have increased the Company's
EBITDA margin 42 percentage points since the Company was acquired by
Bain Capital and management in mid-1995.
4
<PAGE>
GROWTH STRATEGY
The Company's principal objective is to expand its contact lens business in
the faster-growing specialty segment of the market in order to achieve
continued growth in revenues and operating profit. The Company's business
strategy is to:
. CAPITALIZE ON FAVORABLE INDUSTRY TRENDS, including continued increases
in the number of contact lens wearers and an ongoing shift among wearers
from conventional lenses to more profitable disposable lenses and from
clear lenses to specialty lenses;
. INCREASE THE COMPANY'S MARKET SHARE, using both targeted marketing to
eyecare practitioners and direct consumer advertising;
. DEVELOP AND SUCCESSFULLY LAUNCH NEW PRODUCTS, particularly category-
creating products (such as the Company's new line of disposable lenses
offering UV protection), since industry dynamics have historically
provided considerable advantages to a firm that successfully introduces
the first product in a category;
. INCREASE THE INTERNATIONAL PENETRATION OF ITS PRODUCTS, both in
countries where the Company has market leadership positions and in new
markets;
. REALIZE SYNERGIES THROUGH THE INTEGRATION OF BARNES-HIND, including
cross-selling opportunities and expected annual cost savings of at least
$15.8 million; and
. BENEFIT FROM THE COMPANY'S SIGNIFICANT OPERATING LEVERAGE, by utilizing
excess manufacturing capacity, investing in new low-cost manufacturing
technologies and achieving economies of scale in development,
manufacturing and distribution.
RECENT DEVELOPMENTS
On October 2, 1996, the Company acquired the contact lens business of the
Barnes-Hind division of Pilkington plc ("Pilkington") for approximately $62.4
million (plus related acquisition and financing fees of approximately $9.9
million). At the time of the acquisition, Barnes-Hind was the third largest
manufacturer of specialty contact lenses in the world, with a leading market
position in premium and toric lenses. For the twelve months ended October 1,
1996, Barnes-Hind reported net sales of approximately $127.3 million. At the
time of the Barnes-Hind Acquisition, the Company (i) incurred approximately
$96.6 million of indebtedness under a newly established $140.0 million credit
agreement (the "Bank Credit Agreement") to finance the acquisition and repay
all of its then existing indebtedness and (ii) issued a $5.0 million
subordinated note to Pilkington as partial consideration for the purchase price
(the "Pilkington Note"). In connection with the Barnes-Hind Acquisition, the
Company entered into a voluntary consent order with the Federal Trade
Commission (the "FTC") which provides, among other things, that the Company
must divest the U.S. portion of Barnes-Hind's opaque contact lens product line
(the "U.S. Natural Touch Product Line") by January 24, 1997. Such product line
generated approximately $6.8 million of net sales in the LTM period.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Compa- shares (1)
ny................................
Common Stock outstanding after the shares (2)
Offering..........................
Use of proceeds.................... The net proceeds to be received by the
Company from the Offering will be used to
repay certain outstanding indebtedness
incurred in connection with the Barnes-Hind
Acquisition and for the payment of certain
fees to Bain Capital relating to an
advisory agreement.
Proposed Nasdaq National Market " "
symbol............................
</TABLE>
- --------
(1) Does not include up to shares of Common Stock to be sold by the
Selling Stockholders if the Underwriters' over-allotment option is
exercised in full. See "Principal Stockholders."
(2) Does not include 835,502 shares of Common Stock reserved for issuance upon
the exercise of options outstanding as of November 30, 1996 and granted to
members of management and shares of Common Stock reserved for issuance
to employees or non-employee Directors under the Company's stock incentive
plans (collectively, the "Stock Plans"). See "Management."
5
<PAGE>
SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA
(dollars in thousands, except per share amounts)
Set forth below are summary unaudited pro forma financial data of the Company
for the periods and dates indicated. The summary unaudited pro forma statement
of operations data for the year ended December 31, 1995 give effect to: (i) the
Wesley Jessen Acquisition (and related financing transactions); (ii) the
Barnes-Hind Acquisition (and related financing transactions); (iii) the
divesture of Barnes-Hind's U.S. Natural Touch Product Line; (iv) the
transactions described under "The Reclassification"; (v) the refinancing of the
Bank Credit Agreement; and (vi) the Offering and the application of the net
proceeds to the Company therefrom as described under "Use of Proceeds," as if
each had occurred on January 1, 1995. The summary unaudited pro forma statement
of operations data for the period January 1, 1996 through September 28, 1996
and the twelve months ended September 28, 1996 give effect to the transactions
described in items (ii) through (vi) above, as if each had occurred on January
1, 1995. The summary pro forma balance sheet data give effect to the
transactions described in items (ii), (iv), (v) and (vi) above, as if each had
occurred on September 28, 1996. The final allocation of the purchase price of
the Barnes-Hind Acquisition and the resulting depreciation and amortization
expense in the summary unaudited pro forma income statement data may differ
somewhat from the preliminary estimates for the reasons described in more
detail in "Unaudited Pro Forma Financial Data" and in the Notes to Consolidated
Financial Statements of the Company. The summary pro forma financial data have
not been audited, do not purport to represent what the Company's results of
operations actually would have been if the foregoing transactions had actually
occurred as of such dates or what such results will be for any future periods,
and should be read in conjunction with, and are qualified by reference to,
"Unaudited Pro Forma Financial Data," "Selected Historical Consolidated
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the audited consolidated financial statements
and accompanying notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JANUARY 1 TWELVE MONTHS
YEAR ENDED THROUGH ENDED
DECEMBER 31, SEPTEMBER 28, SEPTEMBER 28,
1995 1996 1996
------------ ------------- -------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................ $230,997 $187,051 $243,825
Operating costs and expenses:
Cost of goods sold.................. 97,539 70,646 94,032
Marketing and administrative........ 119,575 90,596 118,518
Research and development............ 9,911 7,346 9,511
Amortization of intangible assets
(negative goodwill)................ (784) (588) (784)
-------- -------- --------
Income from operations.............. 4,756 19,051 22,548
Other (income) expense:
Interest expense.................... 5,467 4,100 5,467
Other income, net................... (1,360) (3,500) (3,500)
-------- -------- --------
Income before income taxes........... 649 18,451 20,581
Income tax (expense) benefit......... (260) (7,380) (8,232)
-------- -------- --------
Net income........................... $ 389 $ 11,071 $ 12,349
======== ======== ========
Pro forma net income per share (a)... $ $ $
======== ======== ========
Pro forma weighted average number of
common shares
outstanding (in thousands) (a)......
======== ======== ========
OTHER DATA:
EBITDA (b)........................... $ 7,186 $ 21,189 $ 25,293
Depreciation and amortization, net of
negative goodwill................... 2,430 2,138 2,745
<CAPTION>
SEPTEMBER 28,
1996
-------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.................................................. $ 50,498
Total assets..................................................... 168,949
Total debt....................................................... 68,555
Stockholders' equity............................................. 12,250
</TABLE>
6
<PAGE>
- --------
(a) Pro forma net income per share and pro forma weighted average number of
common shares outstanding have been adjusted to give effect to (i) a -
for-one stock split of all of the outstanding Common Stock and Common Stock
equivalents and (ii) the reclassification of all shares of Class L Common
Stock into shares of Common Stock at a specified ratio based on the assumed
initial public offering price per share. See "The Reclassification."
(b) "EBITDA" is defined herein as income from operations plus depreciation and
amortization expense, non-recurring charges and other non-cash expense
items. The Company understands that while EBITDA is frequently used by
security analysts in the evaluation of companies, it is not necessarily
comparable to other similarly titled captions of other companies due to
potential inconsistencies in the method of calculation. EBITDA is not
intended as an alternative to cash flow from operating activities as a
measure of liquidity, an alternative to net income as an indicator of the
Company's operating performance or any other measure of performance in
accordance with generally accepted accounting principles.
7
<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
(dollars in thousands)
Set forth below are summary historical consolidated financial data of the
Company and the Predecessor for the periods and dates indicated. The summary
historical consolidated financial data for the periods ended December 31, 1993
and 1994 and the period from January 1, 1995 through June 28, 1995 of the
Predecessor were derived from the audited financial statements of the
Predecessor. The summary historical consolidated financial data as of December
31, 1995 and September 28, 1996 and for the periods from June 29, 1995 through
December 31, 1995 and from January 1, 1996 through September 28, 1996 of the
Company were derived from the audited financial statements of the Company.
Results for interim periods are not necessarily indicative of results for the
full year. Such interim results include all material adjustments, consisting
only of normal recurring adjustments, which management considers necessary for
fair presentation of results for such periods and should be read in conjunction
with, and are qualified by reference to, "Selected Historical Consolidated
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the audited consolidated financial statements
and accompanying notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THE PREDECESSOR THE COMPANY COMBINED (A) THE COMPANY
----------------------------- ------------ -------------------------- -------------
YEAR ENDED JANUARY 1 JUNE 29 JANUARY 1 JANUARY 1
DECEMBER 31, THROUGH THROUGH YEAR ENDED THROUGH THROUGH
------------------ JUNE 28, DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 28,
1993 1994 1995 1995 1995 1995 1996
-------- -------- --------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............... $103,386 $109,640 $ 51,019 $ 54,315 $105,334 $78,077 $96,048
Operating costs and ex-
penses:
Cost of goods sold..... 56,780 65,591 20,871 19,916 38,442 28,202 26,471
Cost of goods sold--
inventory step-up..... -- -- -- 33,929 -- -- 6,626
Marketing and adminis-
trative............... 59,764 79,185 43,236 29,476 69,162 53,042 51,014
Research and
development........... 10,286 9,843 4,569 2,524 4,677 3,471 3,786
Amortization of
intangible assets
(negative goodwill)... 5,472 5,472 2,736 (392) (784) (588) (588)
-------- -------- -------- -------- -------- ------- -------
Income (loss) from
operations.......... (28,916) (50,451) (20,393) (31,138) (6,163) (6,050) 8,739
Other (income) expenses:
Interest expense....... -- -- -- 2,599 4,889 3,742 2,757
Financing charge....... 6,886 7,172 3,511 -- -- -- --
Other income, net...... (256) (202) (1,360) -- (1,360) (1,360) (3,500)
-------- -------- -------- -------- -------- ------- -------
Income (loss) before in-
come taxes............. (35,546) (57,421) (22,544) (33,737) (9,692) (8,432) 9,482
Income tax (expense)
benefit................ 17,214 26,935 9,401 14,022 4,032 3,508 (1,621)
-------- -------- -------- -------- -------- ------- -------
Net income (loss)(b) ... $(18,332) $(30,486) $(13,143) $(19,715) $ (5,660) $(4,924) $ 7,861
======== ======== ======== ======== ======== ======= =======
OTHER DATA:
EBITDA (c).............. $(17,408) $(37,391) $(13,786) $ 2,399 $ (6,947) $(6,638) $14,936
Depreciation and amorti-
zation, net of negative
goodwill............... 11,508 13,060 6,607 (392) (784) (588) (429)
Capital expenditures.... 25,297 3,187 1,959 893 2,852 2,148 3,657
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 28,
1995 1996
------------ -------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital ........................... $30,262 $21,732
Total assets............................... 67,330 63,243
Total debt................................. 42,000 28,500
Stockholders' equity....................... (12,190) (4,057)
</TABLE>
8
<PAGE>
- --------
(a) The combined operating results for the year ended December 31, 1995 and the
nine months ended September 30, 1995 combine the operations of the
Predecessor from January 1, 1995 through June 28, 1995 and the Company from
June 29, 1995 through the end of the respective periods and have been
adjusted to reflect the period as if the Wesley Jessen Acquisition and
related financing transactions had occurred on January 1, 1995. The
combined results include pro forma adjustments for (i) interest expense
associated with the financing of the Wesley Jessen Acquisition; (ii) actual
cost savings relating to the reduction of certain operating expenses
including the consolidation of corporate offices, a reduction in the number
of corporate level employees and related expenses, consolidation of
marketing support facilities and the rationalization of the international
sales and marketing functions; (iii) elimination of the inventory step-up;
and (iv) a reduction in depreciation and amortization expense as a result
of the Company's application of purchase accounting. Because of the
purchase accounting adjustments made to the Predecessor's financial
statements, the financial statements of the Predecessor for the periods
prior to June 29, 1995 are not comparable to those of subsequent periods.
The combined pro forma data are intended to assist in making comparisons
for periods prior to the Barnes-Hind Acquisition. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and the Notes to Consolidated Financial Statements of the Company included
herein.
(b) No historical earnings per share data are presented as the Company does not
consider such data to be meaningful. See "Unaudited Pro Forma Financial
Data" and "The Reclassification."
(c) "EBITDA" is defined herein as income from operations plus depreciation and
amortization expense, non-recurring charges and other non-cash expense
items. The Company understands that while EBITDA is frequently used by
security analysts in the evaluation of companies, it is not necessarily
comparable to other similarly titled captions of other companies due to
potential inconsistencies in the method of calculation. EBITDA is not
intended as an alternative to cash flow from operating activities as a
measure of liquidity, an alternative to net income as an indicator of the
Company's operating performance or any other measure of performance in
accordance with generally accepted accounting principles.
9
<PAGE>
RISK FACTORS
Prospective investors should consider, in addition to the other information
set forth elsewhere in this Prospectus, the following matters in evaluating
the Company and the Common Stock offered hereby.
COMPETITION AND INDUSTRY DYNAMICS
The contact lens market is highly competitive. The Company faces competition
from other companies within each segment of the contact lens market in which
it operates. In the specialty segment of the market, the Company principally
competes with divisions of large medical and pharmaceutical companies as well
as with smaller companies. To the extent the Company operates in the clear
lens segment, it faces competition primarily from Vistakon (a division of
Johnson & Johnson) and other large contact lens manufacturers. Certain of the
Company's competitors in each segment have lower costs of operations, products
with enhanced features, substantially greater resources to invest in product
development and customer support, greater vertical integration and greater
access to financial and other resources than the Company. To a lesser extent,
the Company also competes with manufacturers of eyeglasses and other forms of
vision correction. There can be no assurance that the Company will not
encounter increased competition in the future, particularly from large
manufacturers of clear lenses seeking to enter the specialty lens segment,
which could have a material adverse effect on the Company's financial
condition or results of operations. See "Business--Competition."
The contact lens industry has experienced significant growth in recent
years. There can be no assurance that such growth will continue in the future
or that a general economic slowdown or recession will not have a material
adverse effect on the Company's results of operations. In addition, the
Company believes that it currently benefits from significant advertising
expenditures by certain of its competitors, which serve to raise consumer
awareness of the benefits of disposable contact lenses. There can be no
assurance that the Company's operations would not be adversely effected in the
event such advertising campaigns were discontinued or substantially reduced.
IMPORTANCE OF NEW PRODUCT INTRODUCTIONS; RISK OF PRODUCT OBSOLESCENCE
The specialty segment of the soft contact lens market is characterized by
rapid technological advancements and new product innovations. The Company
believes that the manufacturer who is the first to introduce a new product in
a particular category is likely to maintain the leading market share in such
category. Although the Company has in the past been successful in attaining an
early market share lead in new product categories, there can be no assurance
that it will be successful in doing so in the future. In addition, the expense
involved in developing new products, as well as the cost of obtaining
regulatory approval to market such products, can be substantial. There can be
no assurance that such new products will be successful in the marketplace and,
as a result, justify the expenses involved in their development and approval.
In addition, there can be no assurance that the Company's competitors will not
develop new products or technology which will lead to the obsolescence of the
Company's products, which could have a material adverse effect on the
Company's business, financial condition or results of operations.
RISKS IN THE INTEGRATION OF BARNES-HIND
On October 2, 1996, the Company completed the Barnes-Hind Acquisition. The
Barnes-Hind Acquisition approximately doubled the size of the Company as
measured by net sales. The future success of the Barnes-Hind Acquisition and
its effect on the financial and operating results of the Company will depend
in large part on the ability of the Company to integrate the Barnes-Hind
manufacturing, sales and marketing and administrative functions into its
operations and achieve the cost savings expected to result from the measures
adopted by the Company at the time of such acquisition. The ability of the
Company to accomplish its objectives in connection with the Barnes-Hind
Acquisition is, as in any acquisition, subject to certain risks including,
among others, the possible inability to retain certain Barnes-Hind personnel,
the potentially negative effects of diverting management resources and the
possible failure to retain former customers of Barnes-Hind.
10
<PAGE>
RISKS ASSOCIATED WITH MANUFACTURING OPERATIONS
The Company produces substantially all of its contact lens products in four
state-of-the-art manufacturing facilities. Each facility is dedicated to
producing a particular type of contact lens. As a result, any prolonged
disruption in the operations of any one of the Company's facilities, whether
due to technical or labor difficulties, destruction of or damage to any
facility or other reasons, could have a material adverse effect on the
Company's financial condition or results of operations. See "Business--
Manufacturing."
The Company utilizes a number of advanced polymers and other sophisticated
materials in the production of its contact lenses. Due to the highly technical
and specialized nature of certain of its production materials, the Company
relies from time to time on a single supplier to provide it with sufficient
quantities of certain materials used in the production of one or more of its
product lines. To minimize its reliance on a particular vendor, the Company
continually seeks to identify multiple vendors qualified to supply its
production materials and currently has only two materials that are significant
to its operations that are available from a single source. Although the
Company believes that it is not dependent on any single supplier, the
inability of the Company to obtain sufficient quantities of certain production
inputs could have a material adverse effect on the Company's financial
condition or results of operations.
RISKS ASSOCIATED WITH INTERNATIONAL SALES
The Company derived more than 40% of its net sales from the sale of products
outside the United States in the twelve months ended September 28, 1996 on a
pro forma basis. The Company expects that sales to international customers
will continue to represent a significant portion of its net sales. Risks
inherent in the Company's international business activities generally include
difficulties and unexpected changes in the regulatory environment, currency
fluctuation risk, longer accounts receivable payment cycles and greater
difficulty in collecting accounts receivable, costs and risks associated with
localizing products for foreign countries, the burdens of complying with
foreign laws, tariffs and other trade barriers, trade embargoes and political
instability. There can be no assurance that these factors or other factors
relating to the Company's international business operations will not have a
material adverse effect on the Company's financial condition or results of
operations.
DEPENDENCE ON KEY EXECUTIVES
The Company is dependent to a large degree on the services of its senior
management team, including Kevin J. Ryan, President and Chief Executive
Officer. While Mr. Ryan has entered into an employment agreement with the
Company, there can be no assurance that he or other members of the senior
management team will remain with the Company. The loss of any of these
individuals could have a material adverse effect on the Company. Upon
completion of the Offering, the Company's senior management team will
collectively own shares of Common Stock and hold options to purchase
an additional shares of Common Stock, representing on a fully-diluted
basis approximately % of the outstanding Common Stock. Each employee's
options expire upon or shortly following the termination of such person's
employment with the Company for any reason. See "Management--Employment
Agreements" and "Management--Stock Options."
HISTORICAL NET LOSSES; EXPECTED NON-RECURRING CHARGES
Prior to the Wesley Jessen Acquisition, the Predecessor experienced
significant net losses in each fiscal period since 1993. Such losses were
$18.3 million, $30.5 million and $13.1 million in the years ended December 31,
1993 and 1994 and the period from January 1, 1995 through June 28, 1995,
respectively. The Company recorded a net loss of $19.7 million in the period
from June 29, 1995 through December 31, 1995 and Barnes-Hind experienced net
losses equal to approximately $13.6 million and $11.1 million in the fiscal
years ended March 31, 1995 and 1996, respectively. Although the Company
generated net income of approximately $7.9 million in the period from January
1 through September 28, 1996, there can be no assurance that the Company will
continue to generate profits. Various factors, including delays in new product
development and introductions, new product introductions by competitors, price
competition, delays in regulatory approvals or unexpected delays in achieving
the integration of Barnes-Hind, could have a material adverse effect on the
Company's financial condition or results of operations.
11
<PAGE>
As a result of the Barnes-Hind Acquisition, the Company expects to incur
significant non-recurring charges in the fourth quarter of fiscal 1996 and the
first and second quarters of fiscal 1997, including: (i) approximately $3.5
million of restructuring expenses expected to be incurred by the Company
following the Barnes-Hind Acquisition; (ii) a significant, non-cash increase
in cost of goods sold, which is not expected to exceed $24.0 million (based on
Barnes-Hind's inventory at October 1, 1996); and (iii) extraordinary debt
extinguishment costs consisting of $2.8 million related to writing off
historical capitalized financing fees in connection with the refinancing of
the Company's then existing credit agreement. In connection with the Offering,
the Company expects to incur the following non-recurring charges in the first
quarter of 1997: (i) an expense of approximately $10.0 million representing
the fee payable to Bain Capital in connection with the termination of the
Advisory Agreement (as defined herein) and (ii) extraordinary debt
extinguishment costs consisting of $7.8 million related to writing off
capitalized financing fees in connection with the refinancing of the Bank
Credit Agreement upon the completion of the Offering. As a result of these
charges, the Company expects to report net losses in both the fourth quarter
of 1996 and the first quarter of 1997.
RISKS ASSOCIATED WITH INDEBTEDNESS
Following the Offering, the Company will have approximately $77.0 million of
long-term indebtedness. Subject to the restrictions in the Bank Credit
Agreement, the Company may incur additional indebtedness from time to time to
finance acquisitions or capital expenditures or for other purposes. The level
of the Company's indebtedness could have important consequences, including:
(i) a substantial portion of the Company's cash flow from operations must be
dedicated to debt service and will not be available for other purposes; (ii)
the Company's ability to obtain additional debt financing in the future for
working capital, capital expenditures or acquisitions may be limited; and
(iii) the Company's level of indebtedness could limit its flexibility in
reacting to changes in the industry and economic conditions generally. Certain
of the Company's competitors currently have greater operating and financing
flexibility than the Company. The Company believes that, based upon current
levels of operations, it should be able to meet its debt service obligations
when due. The Company's ability to service such indebtedness, however, will be
dependent on its future performance, which will be affected by prevailing
economic conditions and financial, business and other factors, certain of
which are beyond the Company's control. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
The Bank Credit Agreement imposes certain operating and financial
restrictions on the Company. Contemporaneously with the Offering, the Company
intends to refinance its existing indebtedness under the Bank Credit Agreement
with a new credit agreement (the "New Bank Credit Agreement"). The Company
anticipates that the New Bank Credit Agreement will impose operating and
financial restrictions on the Company similar to those contained in the Bank
Credit Agreement, including a restriction on the Company's ability to pay cash
dividends on its Common Stock. See "Description of Certain Indebtedness."
RISKS ASSOCIATED WITH FUTURE ACQUISITIONS
The Company expects to continue to seek acquisitions, joint ventures or
other strategic arrangements that would enable it to expand its existing
product line, broaden its geographic coverage or allow it to offer
complementary product lines. There can be no assurance that the Company will
continue to acquire businesses or establish such arrangements on satisfactory
terms or that any business acquired by the Company will be integrated
successfully into the Company's operations or be able to operate profitably.
Future acquisitions or other strategic arrangements could require additional
financing, which could result in an increase in the Company's indebtedness.
GOVERNMENT REGULATION
The Company's manufacturing facilities and products are subject to stringent
regulation by the FDA and by various governmental agencies for the states and
localities in which the Company's products are manufactured and/or sold, as
well as by governmental agencies in certain foreign countries in which the
Company's products are manufactured and/or sold. Pursuant to the Federal Food,
Drug, and Cosmetic Act (the "FDC Act"), and the regulations promulgated
thereunder, the FDA regulates the preclinical and clinical testing,
manufacture, labeling,
12
<PAGE>
distribution and promotion of medical devices such as contact lenses.
Noncompliance with applicable requirements can result in, among other things,
fines, injunctions, civil penalties, recall or seizure of products, total or
partial suspension of production, failure of the government to grant premarket
clearance or premarket approval for devices, withdrawal of marketing
clearances or approvals and criminal prosecution. The FDA also has the
authority to request the recall, repair, replacement or refund of the cost of
any device manufactured or distributed by the Company. In addition, as the
Company continues to expand internationally, it will be subject to regulation
in most of the foreign countries in which it sells its products; such
regulations may or may not be similar to those of the FDA. Compliance with
U.S. and foreign governmental regulations, which are subject to change, can
delay new product introduction and may have a material adverse effect on the
Company's financial condition or results of operations.
Under the FDC Act, products developed by the Company, and significant
changes or modifications to existing products, generally require FDA clearance
("510(k) clearance") pursuant to the Section 510(k) notification process
("510(k) notice") or approval of a premarket approval application ("PMA"). The
Company manufactures and markets contact lenses which have received 510(k)
clearances as well as lenses which have been the subject of approved PMA
applications.
The Company has made modifications to its products which the Company
believes do not require the submission of new 510(k) notices or PMA
supplements. There can be no assurance, however, that the FDA would agree with
any of the Company's determinations not to submit a new 510(k) notice or PMA
supplement for any of these changes or would not require the Company to submit
a new 510(k) notice or PMA supplement for any of the changes made to the
device. If the FDA requires the Company to submit a new 510(k) notice or PMA
supplement for any device modification, the Company may be prohibited from
marketing the modified device until the 510(k) notice or PMA supplement is
cleared or approved by the FDA.
The process of obtaining FDA approvals is lengthy, expensive and uncertain.
Moreover, approvals, if granted, may limit the uses for which a product may be
marketed. In addition, there can be no assurance that the selling and
prescribing practices for contact lenses will not change at some point in the
future, which changes could have a material adverse effect on the Company's
business, results of operations or financial condition. No assurance can be
given that future changes in the FDC Act or the FDA's regulations will not
have a material adverse effect on any FDA clearance or approval previously
received with respect to the Company's products. See "Business--Government
Regulation."
DEPENDENCE ON CERTAIN INTELLECTUAL PROPERTY RIGHTS
The Company considers certain of its intellectual property rights, including
patents, trademarks and licensing agreements, to be an integral component of
its business. The Company's policy is to file patent applications to protect
technology, inventions and improvements that are considered important to the
development of its business. There can be no assurance that patent
applications filed by the Company will result in the issuance of patents or
that any of the Company's intellectual property will continue to provide
competitive advantages for the Company's products or will not be challenged,
circumvented by others or invalidated. The Company's policy is to aggressively
prosecute and defend its patents and other proprietary technology. The
prosecution and defense of intellectual property protection, like any lawsuit,
is inherently uncertain and carries no guarantee of success. The protection of
intellectual property in certain foreign countries is particularly uncertain.
See "Business--Patents and Trademarks."
PRODUCT LIABILITY EXPOSURE
The Company faces an inherent risk of exposure to product liability claims
in the event that the use of its products results in personal injury. Although
the Company has not experienced any material losses due to product liability
claims, there can be no assurance that it will not experience such losses in
the future. Also, in the event that any of the Company's products prove to be
defective, the Company may be required to recall or redesign such products.
The Company maintains insurance against product liability claims, but there
can be no assurance that such coverage will be adequate to cover any
liabilities that the Company may incur or that such insurance
13
<PAGE>
will continue to be available on terms acceptable to the Company. A successful
claim brought against the Company in excess of available insurance coverage,
or any claim or product recall that results in significant adverse publicity
against the Company, may have a material adverse effect on the Company's
financial condition or results of operations. See "Business--Legal
Proceedings."
CONTROLLING STOCKHOLDERS; POTENTIAL CONFLICTS OF INTEREST
Upon completion of the Offering (and giving effect to currently exercisable
options), investment funds controlled by Bain Capital will beneficially own
approximately % of the outstanding Common Stock ( % if the Underwriters'
over-allotment option is exercised in full). By virtue of such stock
ownership, Bain Capital will be able to control the election of the members of
the Company's Board of Directors and to generally exercise control over the
affairs of the Company. Such concentration of ownership could also have the
effect of delaying, deterring or preventing a change in control of the Company
that might otherwise be beneficial to stockholders. In addition, four
representatives of Bain Capital currently serve on the Company's Board of
Directors. There can be no assurance that conflicts of interest will not arise
with respect to such Directors or that such conflicts will be resolved in a
manner favorable to the Company. See "Principal Stockholders."
CERTAIN ANTI-TAKEOVER EFFECTS
Certain provisions of the Company's Restated Certificate of Incorporation
(the "Restated Certificate") and Amended and Restated By-laws (the "By-laws")
may inhibit changes in control of the Company not approved by the Company's
Board of Directors. These provisions include: (i) a classified Board of
Directors; (ii) a prohibition on stockholder action through written consents;
(iii) a requirement that special meetings of stockholders be called only by
the Board of Directors; (iv) advance notice requirements for stockholder
proposals and nominations; (v) limitations on the ability of stockholders to
amend, alter or repeal the By-laws; and (vi) the authority of the Board to
issue without stockholder approval preferred stock with such terms as the
Board may determine. The Company will also be afforded the protections of
Section 203 of the Delaware General Corporation Law, which could have similar
effects. See "Description of Capital Stock."
ABSENCE OF PRIOR PUBLIC MARKET; SUBSTANTIAL DILUTION
Prior to the Offering, there has been no public market for the Common Stock.
The initial public offering price of the Common Stock will be determined by
negotiations among the Company, the Selling Stockholders and the
Representatives (as defined herein) and may not be indicative of the market
price for shares of the Common Stock after the Offering. For a description of
factors considered in determining the initial public offering price, see
"Underwriting." There can be no assurance that an active trading market for
the Common Stock will develop or if developed, that such market will be
sustained. The market price for shares of the Common Stock may be
significantly affected by such factors as quarter-to-quarter variations in the
Company's results of operations, news announcements or changes in general
market conditions. In addition, general market, economic and political
conditions may adversely affect the market price of the Common Stock,
regardless of the Company's actual performance. Because the initial public
offering price is substantially higher than the book value per share of Common
Stock, purchasers of the Common Stock in the Offering will be subject to
immediate and substantial dilution. See "Dilution."
POTENTIAL ADVERSE IMPACT FROM SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company expects to have
shares of Common Stock outstanding. Of these shares, the shares
of Common Stock ( shares if the Underwriters' over-allotment option is
exercised in full) sold in the Offering will be freely tradeable without
restriction under the Securities Act of 1933, as amended (the "Securities
Act"), except any such shares which may be acquired by an "affiliate" of the
Company. Subject to certain 180-day "lock-up" agreements described herein,
approximately and shares of Common Stock will be eligible
for sale in the public market, subject to compliance with the resale volume
limitations and other restrictions of Rule 144 under the Securities Act,
beginning 90 days after the date of this Prospectus and on June 28, 1997,
respectively. Beginning 180 days after the completion of the Offering, the
holders of an aggregate of approximately shares of Common Stock will
have certain rights to register their shares of Common Stock under the
Securities Act at the Company's expense. Future sales of the shares of Common
Stock held by existing stockholders could have a material adverse effect on
the price of the Common Stock. See "Shares Eligible for Future Sale."
14
<PAGE>
THE COMPANY
Wesley Jessen is the leading worldwide developer, manufacturer and marketer
of specialty soft contact lenses. The Company operates primarily in the
specialty segment of the soft lens market, where it has the leading share in
each of the cosmetic and premium lens segments and the second leading share in
the toric lens segment. The Company's principal objective is to expand its
contact lens business in the faster-growing specialty segment of the market in
order to achieve growth in revenues and operating profit.
The Company was founded in 1946 by contact lens pioneers Drs. Newton K.
Wesley and George Jessen, after the two doctors discovered that hard contact
lenses could be used to prevent a rare sight-threatening eye disease suffered
by Dr. Wesley. Originally known as The Plastic Contact Lens Company, the
Company went on to pioneer the design, manufacturing and fitting techniques of
hard contact lenses. Throughout its history, the Company has remained a market
leader in research and development, accounting for numerous technological
breakthroughs in contact lenses. In 1978, the Company received FDA approval of
its hydrogel lens, a durable and highly oxygen-permeable soft plastic lens
made from a unique polymer. In 1986, the Company pioneered the development of
the conventional opaque color lens (which change the color of dark eyes), and
in 1989, the Company introduced its toric lenses, which correct vision for
people with astigmatism (the condition of an irregularly shaped cornea). The
Company's most significant product introductions to the soft contact lens
market in the last three years have been its Precision UV lenses, which
provide eyes with protection from ultraviolet light, and its FreshLook
disposable opaque and eyecolor-enhancing lenses.
From 1980 to 1995, Wesley Jessen operated as a wholly owned subsidiary of
Schering-Plough Corporation ("Schering-Plough"). On June 28, 1995, Bain
Capital and management acquired the Company in the Wesley Jessen Acquisition.
After the Wesley Jessen Acquisition, the Company's new management team pursued
an aggressive strategy of cost savings and revenue enhancement to improve the
Company's results of operations. During this period, management (i) redefined
the Company's disposable lens marketing strategy by repricing and repackaging
the Company's products to be more competitive with industry standards; (ii)
launched a national consumer advertising campaign featuring Christy
Turlington; (iii) expanded its product offerings in its FreshLook line of
disposable colored contact lenses; (iv) heightened its sales and marketing
focus on serving the needs of eyecare practitioners; and (v) achieved
substantial cost savings through personnel reductions, decreased overall
marketing and advertising expenses, consolidation of facilities and increased
operating efficiencies. As a result of management's efforts, the Company's
EBITDA increased from a loss of $13.8 million in the period from January 1,
1995 through June 28, 1995 to income of $14.9 million in the period from
January 1, 1996 through September 28, 1996.
On October 2, 1996, the Company acquired substantially all the assets and
assumed certain liabilities of Barnes-Hind from Pilkington. Founded in 1939,
Barnes-Hind is widely recognized in the contact lens industry as a leader in
product and material innovation and design. Barnes-Hind was acquired by
Pilkington in 1987 and combined with its existing contact lens operations. At
the time of the Barnes-Hind Acquisition, Barnes-Hind was the third largest
manufacturer of specialty contact lenses in the world, with a leading market
position in premium and toric lenses.
Upon completion of the Offering, the Company's senior management team will
collectively own shares of Common Stock and hold options to
purchase an additional shares of Common Stock, representing on a
fully-diluted basis approximately % of the outstanding Common Stock.
Investment funds controlled by Bain Capital will collectively own shares
of Common Stock, representing on a fully-diluted basis approximately % of
the outstanding Common Stock ( % if the Underwriters' over-allotment
option is exercised in full).
The Company's principal executive offices are located at 333 East Howard
Avenue, Des Plaines, Illinois 60018-5903 and its telephone number is (847)
294-3000.
15
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Offering (after deducting
applicable underwriting discounts and estimated expenses payable by the
Company) are estimated to be approximately $45.2 million (assuming an initial
public offering price of $ per share). The Company will not receive any of
the proceeds from the sale of shares of Common Stock by the Selling
Stockholders in the event the Underwriters' over-allotment option is
exercised. The Company expects to use (i) approximately $30.0 million of the
net proceeds to reduce the Company's indebtedness under the Bank Credit
Agreement; (ii) approximately $5.2 million to repay the Pilkington Note in
full (including accrued interest); and (iii) approximately $10.0 million to
pay a fee to Bain Capital in connection with the termination of the Advisory
Agreement.
The indebtedness to be repaid under the Bank Credit Agreement consists of
multi-tranche term loans with a current aggregate principal balance of $95.0
million (the "Term Loans"), with principal payments scheduled in varying
amounts from 1996 through 2004. Such Term Loans bear interest at varying rates
based, at the Company's option, on either the Eurodollar rate (as defined in
the Bank Credit Agreement) plus 275 to 325 basis points or the bank base rate
(as defined in the Bank Credit Agreement) plus 175 to 225 basis points. The
overall effective interest rate for the Term Loans at October 2, 1996 was
8.48%. See "Description of Certain Indebtedness--Bank Credit Agreement."
The Pilkington Note bears interest at 8% per annum, payable in kind, and
matures on February 1, 2005 or on any date that Bain Capital and its
affiliates (i) cease to beneficially own at least 25% of the Company's voting
stock or (ii) receive any proceeds from the sale of any of their shares of
Common Stock in a public offering. The Pilkington Note was issued by the
Company on October 2, 1996 in connection with the Barnes-Hind Acquisition.
In connection with the Offering, the Company expects to refinance the
indebtedness under the Bank Credit Agreement remaining after application of
the net proceeds of the Offering as described above. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources" and "Description of Certain Indebtedness--New
Bank Credit Agreement."
The Company expects to enter into a new advisory agreement with Bain Capital
prior to the completion of the Offering. See "Certain Transactions--Advisory
Agreement."
16
<PAGE>
DIVIDEND POLICY
Since the Wesley Jessen Acquisition in 1995, the Company has not declared or
paid any cash or other dividends on its Common Stock and does not expect to
pay dividends for the foreseeable future. Instead, the Company currently
intends to retain earnings to support its growth strategy and reduce
indebtedness. As a holding company, the ability of the Company to pay
dividends in the future is dependent upon the receipt of dividends or other
payments from its principal operating subsidiary. The payment of dividends or
other distributions by such operating subsidiary to the Company for purposes
of paying dividends to holders of Common Stock is prohibited by the Bank
Credit Agreement. Any future determination to pay dividends will be at the
discretion of the Company's Board of Directors and will depend upon, among
other factors, the Company's results of operations, financial condition,
capital requirements and contractual restrictions. See "Description of Certain
Indebtedness."
THE RECLASSIFICATION
The Company currently has two classes of issued and outstanding stock, the
Class L Common Stock (the "Class L Common") and the Common Stock, which are
identical except that each share of Class L Common is entitled to a
preferential payment (the "Preference Amount") upon any distribution by the
Company to holders of its capital stock (whether by dividend, liquidating
distribution or otherwise) equal to the original cost of such share ($17.41)
plus an amount which accrues on a daily basis at a rate of 12.5% per annum on
such cost and on the amount so accrued in prior quarters. As of September 28,
1996, the Preference Amount was $20.30 per share of Class L Common issued at
the time of the Wesley Jessen Acquisition. Prior to the completion of the
Offering, all of the outstanding shares of Class L Common will be reclassified
into shares of Common Stock (the "Reclassification") and a -for-one stock
split will be effected as to all of the then outstanding shares of Common
Stock (the "Stock Split"). In connection with the Reclassification (prior to
the Stock Split), each outstanding share of Class L Common will be
reclassified into one share of Common Stock plus an additional number of
shares having a value, based on the initial public offering price, equal to
the Preference Amount as of the consummation of the Offering. Assuming an
initial public offering price of $ per share (the mid-point of the range
set forth on the cover page of this Prospectus), an aggregate of shares of
Common Stock will be issued in exchange for the outstanding shares of Class L
Common in connection with the Reclassification. Fractional shares otherwise
issuable as a result of the Reclassification and Stock Split will be rounded
to the nearest whole number. See "Description of Capital Stock."
17
<PAGE>
CAPITALIZATION
The following table sets forth at September 28, 1996: (i) the actual
capitalization of the Company; (ii) the pro forma capitalization of the
Company after giving effect to the Barnes-Hind Acquisition (and related
financing transactions); and (iii) the pro forma, as adjusted capitalization
of the Company after giving effect to: (a) the Reclassification; (b) the
refinancing of the Bank Credit Agreement; and (c) the Offering, assuming an
initial public offering price of $ per share, and the application of the
net proceeds to the Company therefrom as described under "Use of Proceeds."
This table should be read in conjunction with "Selected Historical
Consolidated Financial Data" and "Unaudited Pro Forma Financial Data" included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 28, 1996
-------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt:
Current portion of long-term debt ........... $ 2,000 $ 1,555 $ 1,555
======= ======== =======
Long-term debt, net of current maturities:
Revolving credit facility.................... $ -- $ -- $ --
Term loans................................... 26,500 95,000 67,000(a)
Promissory note (b).......................... -- 5,000 --
------- -------- -------
Total long-term debt ...................... 26,500 100,000 67,000
Stockholders' equity:
Class L Common Stock, $0.01 par value,
redeemable, cumulative yield of 12.5%,
600,000 shares authorized; 321,067 shares
issued on an actual basis; and no shares
issued on a pro forma, as adjusted basis.... 3 3 -- (c)
Serial Preferred Stock, $0.01 par value,
5,000,000 shares authorized; no shares
issued on an actual or on a pro forma, as
adjusted basis ............................. -- -- --
Common Stock, $0.01 par value, 50,000,000
shares authorized; 4,090,582 shares issued
on an actual basis; shares issued
on a pro forma, as adjusted basis (d) ...... 40 40
Additional paid-in capital .................. 7,754 7,754
Accumulated deficit ......................... (11,854) (29,947)
------- -------- -------
Total stockholders' equity (deficit)....... (4,057) (22,150)
------- -------- -------
Total capitalization..................... $22,443 $ 77,850 $
======= ======== =======
</TABLE>
- --------
(a) Reflects the use of approximately $30.0 million of the net proceeds to the
Company to repay borrowings on the Term Loans under the Bank Credit
Agreement, offset by an additional $2.0 million of borrowings to fund the
financing fees associated with New Bank Credit Agreement.
(b) Reflects a $5.0 million promissory note issued to Pilkington in connection
with the Barnes-Hind Acquisition. The Pilkington Note bears interest at
8%, payable in kind, and matures on February 1, 2005 or on any date that
Bain Capital and its affiliates (i) cease to beneficially own at least 25%
of the Company's voting stock or (ii) receive any proceeds from the sale
of any of their shares of Common Stock in a public offering.
(c) Assuming an initial public offering price of $ per share (the mid-
point of the range set forth on the cover page of this Prospectus), an
aggregate of shares of Common Stock will be issued in exchange for
the outstanding shares of Class L Common in connection with the
Reclassification. See "The Reclassification."
(d) Does not include 835,502 shares of Common Stock reserved for issuance upon
the exercise of options outstanding as of November 30, 1996 and granted to
members of management or shares of Common Stock reserved for
issuance under the Stock Plans. See "Management."
18
<PAGE>
DILUTION
The following table presents certain information concerning the pro forma
net tangible book value per share of the Common Stock as of September 28,
1996, assuming the consummation of the Reclassification and Stock Split, and
as adjusted to reflect the Offering, at an assumed initial public offering
price of $ per share, after deducting the estimated offering expenses
and underwriting discounts and commissions:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............ $
Pro forma net tangible book value per share before the Of-
fering (a)................................................ $
Increase per share attributable to payments by new invest-
ors.......................................................
------
Adjusted pro forma net tangible book value per share after
the
Offering..................................................
------
Dilution per share to new investors (b) ................... $
======
</TABLE>
- --------
(a) Net tangible book value per share of Common Stock is determined by
dividing the Company's pro forma tangible net worth at September 28, 1996
(giving effect to the Barnes-Hind Acquisition) of $ by the
aggregate number of shares of Common Stock outstanding.
(b) Dilution is determined by subtracting net tangible book value per share
after the Offering from the initial public offering price per share.
The following table summarizes, as of September 28, 1996 on a pro forma
basis (giving effect to the Reclassification and Stock Split), the difference
between the existing stockholders and the new investors with respect to the
number of shares of Common Stock purchased (or to be purchased) from the
Company, the total consideration paid (or to be paid) and the average price
per share paid (or to be paid) by the existing stockholders and new investors,
at an assumed initial public offering price of $ per share, before
deducting the estimated offering expenses and underwriting discounts and
commissions:
<TABLE>
<CAPTION>
SHARES TOTAL
PURCHASED CONSIDERATION AVERAGE
-------------- ------------------ PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders (c)..... % $7,797,004 % $
New investors.................
------ ----- ---------- ----- --------
Total....................... % $ % $
====== ===== ========== ===== ========
</TABLE>
- --------
(c) Does not include 835,502 shares of Common Stock reserved for issuance upon
the exercise of options granted to management and outstanding as of
November 30, 1996 (with a weighted average exercise price of $6.67 per
share prior to the Stock Split) or shares of Common Stock reserved
for issuance under the Stock Plans. See "Management--Stock Options."
19
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
The Unaudited Pro Forma Consolidated Statements of Operations for the year
ended December 31, 1995, the period January 1 through September 28, 1996, and
the twelve months ended September 28, 1996 give pro forma effect to: (i) the
Wesley Jessen Acquisition; (ii) the Barnes-Hind Acquisition (and related
financing transactions); (iii) the divestiture of Barnes-Hind's U.S. Natural
Touch Product Line; (iv) the Reclassification; (v) the refinancing of the Bank
Credit Agreement; and (vi) the Offering and the application of the net
proceeds to the Company therefrom as described under "Use of Proceeds," as if
each had occurred on January 1, 1995.
The Unaudited Pro Forma Consolidated Balance Sheet at September 28, 1996
gives pro forma effect to: (i) the Barnes-Hind Acquisition; (ii) the
Reclassification; (iii) the refinancing of the Bank Credit Agreement; and (iv)
the Offering and the application of the net proceeds to the Company therefrom
as described under "Use of Proceeds," as if such transactions had occurred as
of September 28, 1996. The historical balance sheet of the Company already
reflects the Wesley Jessen Acquisition, which took place as of June 28, 1995.
In connection with the Barnes-Hind Acquisition, the Company entered into a
voluntary consent order with the FTC which provides, among other things, that
the Company must divest Barnes-Hind's U.S. Natural Touch Product Line by
January 24, 1997. The Company is currently evaluating divestiture
opportunities. Should an agreement be reached in the near future, the purchase
accounting would be revised to include a revaluation of the assets associated
with the U.S. Natural Touch Product Line so that no gain or loss would result
from such divestiture, as is required under generally accepted accounting
principles.
The Unaudited Pro Forma Consolidated Statements of Operations referred to
above do not reflect the following charges related to the Offering and the
Barnes-Hind Acquisition which the Company expects to incur in the fourth
quarter of fiscal 1996 and the first and second quarters of fiscal 1997: (i) a
non-recurring expense of approximately $10.0 million representing a fee
payable to Bain Capital in connection with the termination of the Advisory
Agreement; (ii) approximately $3.5 million of restructuring expenses expected
to be incurred by the Company following the Barnes-Hind Acquisition; (iii) a
significant, non-recurring, non-cash increase in cost of goods sold which is
not expected to exceed approximately $24.0 million, based on Barnes-Hind's
inventory at October 1, 1996 (due to the Company's application of purchase
accounting for the Barnes-Hind Acquisition as a result of which the Company
will write up the book value of the acquired Barnes-Hind inventory to fair
market value less estimated selling costs); (iv) extraordinary debt
extinguishment costs consisting of $2.8 million related to writing off
historical capitalized financing fees in connection with the refinancing of
its then existing credit agreement; and (v) extraordinary debt extinguishment
costs estimated at $7.8 million related to writing off capitalized financing
fees in connection with the refinancing of the Bank Credit Agreement upon the
completion of the Offering. The Unaudited Pro Forma Consolidated Balance
Sheet, however, does reflect the charges enumerated in (i) through (v) above.
Such charges aggregate approximately $48.0 million, before the related tax
benefit of $17.2 million.
The unaudited pro forma financial data are provided for informational
purposes only and are not necessarily indicative of the results of operations
or financial position of the Company had the transactions assumed therein
occurred, nor are they necessarily indicative of the results of operations
which may be expected to occur in the future. Furthermore, the unaudited pro
forma financial data are based upon assumptions that the Company believes are
reasonable and should be read in conjunction with the financial statements and
the accompanying notes thereto included elsewhere in this Prospectus.
20
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
WESLEY JESSEN ADJUSTMENTS
------------------------ -----------------------
PREDECESSOR COMPANY
JANUARY 1 JUNE 29 BARNES-HIND PRO FORMA
THROUGH THROUGH YEAR ENDED YEAR ENDED
JUNE 28, DECEMBER 31, MARCH 31, DECEMBER 31,
1995 1995 1996 COMBINED ACQUISITIONS OFFERING 1995
----------- ------------ ----------- -------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $ 51,019 $ 54,315 $132,581 $237,915 $ (6,918)(a) $ -- $230,997
Operating costs and
expenses:
i
Cost of goods sold..... 20,871 19,916 63,341 104,128 (3,043)(a) -- 97,539
(2,907)(b)
(639)(e)
Cost of goods sold--
inventory step-up..... -- 33,929 -- 33,929 (33,929)(c) -- --
i
Marketing and
administrative ....... 43,236 29,476 65,828 138,540 (2,058)(a) (500)(k) 119,575
(1,275)(b)
(2,976)(d)
(12,156)(e)
i
Research and
development........... 4,569 2,524 7,884 14,977 (492)(b) -- 9,911
(1,964)(d)
(2,610)(e)
Amortization of
intangible assets
(negative goodwill)... 2,736 (392) -- 2,344 (3,128)(f) -- (784)
-------- -------- -------- -------- -------- ------- --------
Income (loss) from oper-
ations................. (20,393) (31,138) (4,472) (56,003) 60,259 500 4,756
Other (income) expense:
Interest income........ -- -- (773) (773) 773 (g) -- --
Interest expense....... -- 2,599 4,315 6,914 3,807 (h) (5,254)(l) 5,467
Financing charge....... 3,511 -- -- 3,511 (3,511)(i) -- --
Other income, net...... (1,360) -- -- (1,360) -- -- (1,360)
-------- -------- -------- -------- -------- ------- --------
Income (loss) before
income taxes........... (22,544) (33,737) (8,014) (64,295) 59,190 5,754 649
Income tax (expense)
benefit................ 9,401 14,022 (3,116) 20,307 (18,265)(j) (2,302)(j) (260)
-------- -------- -------- -------- -------- ------- --------
Net income (loss)....... $(13,143) $(19,715) $(11,130) $(43,988) $ 40,925 $ 3,452 $ 389
======== ======== ======== ======== ======== ======= ========
Pro forma net income per share............................................................... $ (m)
========
Pro forma weighted average number of common shares outstanding (in thousands)................ (m)
========
OTHER DATA:
EBITDA (l)................................................................................... $ 7,186
Depreciation and amortization, net of negative goodwill...................................... 2,430
</TABLE>
(1) "EBITDA" is defined herein as income from operations plus depreciation and
amortization expense, non-recurring charges and other non-cash expense
items. The Company understands that while EBITDA is frequently used by
security analysts in the evaluation of companies, it is not necessarily
comparable to other similarly titled captions of other companies due to
potential inconsistencies in the method of calculation. EBITDA is not
intended as an alternative to cash flow from operating activities as a
measure of liquidity, an alternative to net income as an indicator of the
Company's operating performance or any other measure of performance in
accordance with generally accepted accounting principles.
See accompanying notes.
21
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
PERIOD FROM JANUARY 1, 1996 THROUGH SEPTEMBER 28, 1996
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
COMPANY BARNES-HIND PRO FORMA
JANUARY 1 JANUARY 1 JANUARY 1
THROUGH THROUGH ADJUSTMENTS THROUGH
SEPTEMBER 28, OCTOBER 1, ----------------------- SEPTEMBER 28,
1996 1996 (1) COMBINED ACQUISITIONS OFFERING 1996
------------- ----------- -------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $96,048 $ 96,215 $192,263 $(5,212)(a) $ -- $187,051
Operating costs and ex-
penses:
i
Cost of goods sold..... 26,471 47,461 73,932 (2,278)(a) -- 70,646
(449)(b)
(559)(e)
Cost of goods sold--in-
ventory
step-up............... 6,626 -- 6,626 (6,626)(c) -- --
i
Marketing and adminis-
trative .............. 51,014 58,780 109,794 (2,084)(a) (750)(k) 90,596
(160)(b)
(16,204)(e)
i
Research and develop-
ment.................. 3,786 5,466 9,252 (32)(b) -- 7,346
(1,874)(e)
Amortization of nega-
tive goodwill......... (588) -- (588) -- -- (588)
------- -------- -------- ------- ------ --------
Income (loss) from oper-
ations................. 8,739 (15,492) (6,753) 25,054 750 19,051
Other (income) expense:
Interest income........ -- (340) (340) 340 (g) -- --
Interest expense....... 2,757 378 3,135 4,905 (h) (3,940)(l) 4,100
Other income, net...... (3,500) -- (3,500) -- -- (3,500)
------- -------- -------- ------- ------ --------
Income (loss) before in-
come taxes............. 9,482 (15,530) (6,048) 19,809 4,690 18,451
Income tax (expense)
benefit................ (1,621) (2,969) (4,590) (914)(j) (1,876)(j) (7,380)
------- -------- -------- ------- ------ --------
Net income (loss)....... $ 7,861 $(18,499) $(10,638) $18,895 $2,814 $ 11,071
======= ======== ======== ======= ====== ========
Pro forma net income per share.................................................... $ (m)
========
Pro forma weighted average number of common shares outstanding (in thousands)..... (m)
========
OTHER DATA:
EBITDA (2)........................................................................ $ 21,189
Depreciation and amortization, net of negative goodwill........................... 2,138
</TABLE>
- --------
(1) Represents the period from January 1, 1996 through October 1, 1996.
Included in this period is the three-month period beginning January 1,
1996 and ending March 31, 1996 (Barnes-Hind's fourth fiscal quarter). This
three-month period is also included in Barnes-Hind's Year Ended March 31,
1996 data presented as part of the Unaudited Pro Forma Consolidated
Statement of Operations for the year ended December 31, 1995.
(2) "EBITDA" is defined herein as income from operations plus depreciation and
amortization expense, non-recurring charges and other non-cash expense
items. The Company understands that while EBITDA is frequently used by
security analysts in the evaluation of companies, it is not necessarily
comparable to other similarly titled captions of other companies due to
potential inconsistencies in the method of calculation. EBITDA is not
intended as an alternative to cash flow from operating activities as a
measure of liquidity, an alternative to net income as an indicator of the
Company's operating performance or any other measure of performance in
accordance with generally accepted accounting principles.
See accompanying notes.
22
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
LATEST TWELVE MONTHS ENDED SEPTEMBER 28, 1996(1)
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
COMPANY BARNES-HIND PRO FORMA
TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDED ENDED ADJUSTMENTS ENDED
SEPTEMBER 28, OCTOBER 1, ----------------------- SEPTEMBER 28,
1996 1996 (1) COMBINED ACQUISITIONS OFFERING 1996
------------- ------------- -------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $123,305 $127,302 $250,607 $(6,782)(a) $ -- $243,825
Operating costs and ex-
penses:
i
Cost of goods sold..... 36,711 61,612 98,323 (2,967)(a) -- 94,032
(590)(b)
(734)(e)
Cost of goods sold--in-
ventory step-up....... 20,927 -- 20,927 (20,927)(c) -- --
i
Marketing and
administrative........ 67,134 75,079 142,213 (2,675)(a) (1,000)(k) 118,518
(211)(b)
(19,809)(e)
i
Research and develop-
ment.................. 4,992 7,205 12,197 (42)(b) -- 9,511
(2,644)(e)
Amortization of nega-
tive goodwill......... (784) -- (784) -- -- (784)
-------- -------- -------- ------- ------ --------
Income (loss) from oper-
ations................. (5,675) (16,594) (22,269) 43,817 1,000 22,548
Other (income) expense:
Interest income........ -- (540) (540) 540 (g) -- --
Interest expense....... 3,904 1,619 5,523 5,198 (h) (5,254)(l) 5,467
Other income, net...... (3,500) -- (3,500) -- -- (3,500)
-------- -------- -------- ------- ------ --------
Income (loss) before in-
come taxes............. (6,079) (17,673) (23,752) 38,079 6,254 20,581
Income tax (expense)
benefit................ 2,529 (5,297) (2,768) (2,962)(j) (2,502)(j) (8,232)
-------- -------- -------- ------- ------ --------
Net income (loss)....... $ (3,550) $(22,970) $(26,520) $35,117 $3,752 $ 12,349
======== ======== ======== ======= ====== ========
Pro forma net income per share...................................................... $ (m)
========
Pro forma weighted average number of common shares outstanding (in thousands)....... (m)
========
OTHER DATA:
EBITDA(2)........................................................................... $ 25,293
Depreciation and amortization, net of negative goodwill............................. 2,745
</TABLE>
- --------
(1) The Company believes that the pro forma presentation of the latest twelve-
month periods ended September 28, 1996 and October 1, 1996, of the
combined Wesley Jessen and Barnes-Hind operations, respectively, provides
the most meaningful and representative combined results of operations for
the two businesses.
(2) "EBITDA" is defined herein as income from operations plus depreciation and
amortization expense, non-recurring charges and other non-cash expense
items. The Company understands that while EBITDA is frequently used by
security analysts in the evaluation of companies, it is not necessarily
comparable to other similarly titled captions of other companies due to
potential inconsistencies in the method of calculation. EBITDA is not
intended as an alternative to cash flow from operating activities as a
measure of liquidity, an alternative to net income as an indicator of the
Company's operating performance or any other measure of performance in
accordance with generally accepted accounting principles.
See accompanying notes.
23
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(dollars in thousands)
The Unaudited Pro Forma Statements of Operations gives effect to the
following unaudited pro forma adjustments:
(a) Reflects the requirement that the Company divest the U.S. Natural Touch
Product Line by January 24, 1997 pursuant to the terms of its voluntary
consent order with the FTC. The Company does not believe that the
disposition of this product line will have a material impact on the
Company's results of operations. The unaudited historical operating
results of the U.S. Natural Touch Product Line were as follows:
<TABLE>
<CAPTION>
JANUARY 1 TWELVE MONTHS
YEAR ENDED THROUGH ENDED
DECEMBER 31, SEPTEMBER 28, SEPTEMBER 28,
1995 1996 1996
------------ ------------- -------------
<S> <C> <C> <C>
Net sales........................ $6,918 $5,212 $6,782
Operating costs and expenses:
Cost of goods sold............. 3,043 2,278 2,967
Marketing and administrative .. 2,058 2,084 2,675
------ ------ ------
Pre-tax contribution............. $1,817 $ 850 $1,140
====== ====== ======
(b) Represents the reduction of depreciation expense as a result of the
Company's application of purchase accounting whereby the excess of the
fair market value of the net assets acquired over the purchase price was
allocated as a reduction to the fair market value of the property, plant
and equipment acquired in both the Wesley Jessen Acquisition and the
Barnes-Hind Acquisition, as follows:
<CAPTION>
JANUARY 1 TWELVE MONTHS
YEAR ENDED THROUGH ENDED
DECEMBER 31, SEPTEMBER 28, SEPTEMBER 28,
1995 1996 1996
------------ ------------- -------------
<S> <C> <C> <C>
Reduction in depreciation expense
recorded in:
Cost of goods sold............. $2,907 $ 449 $ 590
Marketing and administrative... 1,275 160 211
Research and development....... 492 32 42
------ ------ ------
Total pro forma reduction in
depreciation expense......... $4,674 $ 641 $ 843
====== ====== ======
</TABLE>
(c) Reflects the adjustment to eliminate the non-recurring impact of the
inventory write-up as a result of the Company's application of purchase
accounting in connection with the Wesley Jessen Acquisition. In
connection with the Company's purchase accounting for the Barnes-Hind
Acquisition, a significant, non-recurring, non-cash increase in cost of
goods sold is expected as the carrying value of Barnes-Hind's inventory
is written up to its fair market value, less estimated selling expenses.
The impact of the Barnes-Hind inventory write-up is appropriately
excluded from the Unaudited Pro Forma Consolidated Statements of
Operations as presented.
(d) Represents the recurring cost savings to the Company relating to the
Wesley Jessen Acquisition which included the reduction of certain
operating expenses related primarily to the consolidation of the
corporate offices, a reduction in the actual number of corporate level
employees and related benefits and facilities expenses, consolidation of
marketing support facilities, and the rationalization of the
international sales and marketing function. The estimated cost savings in
the fiscal year ended December 31, 1995 were $2,976 and $1,964 in
marketing and administrative expenses and research and development
expenses, respectively.
(e) Represents the estimated recurring cost savings to the Company relating
to the Barnes-Hind corporate consolidation plan, which included the
actual reduction of certain operating expenses related primarily to the
closure of the Sunnyvale, California corporate offices upon consummation
of the Barnes-Hind
24
<PAGE>
Acquisition, a reduction in the actual number of corporate level employees
and related personnel and facilities expenses all of which have commenced
implementation. The effect of the estimated cost savings related to the
above described items are presented below:
<TABLE>
<CAPTION>
JANUARY 1 TWELVE MONTHS
YEAR ENDED THROUGH ENDED
DECEMBER 31, SEPTEMBER 28, SEPTEMBER 28,
1995 1996 1996
------------ ------------- -------------
<S> <C> <C> <C>
Cost savings by category:
Wages and related personnel
costs......................... $ 11,757 $ 8,469 $ 12,001
Contractual "change-in-control"
employment obligations........ -- 7,346 7,346
Facilities and related occu-
pancy costs................... 3,648 2,822 3,840
-------- ------- --------
Total reduction in Barnes-
Hind operating expenses..... $ 15,405 $18,637 $ 23,187
======== ======= ========
Cost savings by statement of
operations caption:
Cost of goods sold ............ $ 639 $ 559 $ 734
Marketing and administrative... 12,156 16,204 19,809
Research and development ...... 2,610 1,874 2,644
-------- ------- --------
Total reduction in Barnes-
Hind operating expenses..... $ 15,405 $18,637 $ 23,187
======== ======= ========
</TABLE>
(f) Represents the net elimination of historical amortization expense recorded
by the Predecessor, as well as the pro forma impact of the amortization of
negative goodwill recorded by the Company in connection with the Wesley
Jessen Acquisition. Note that there is not a similar impact related to the
Barnes-Hind Acquisition, as there was no goodwill recorded as a result of
the Company's purchase accounting.
(g) Reflects the elimination of intercompany interest income allocated to
Barnes-Hind by Pilkington.
25
<PAGE>
(h) Represents additional pro forma interest expense, as follows:
<TABLE>
<CAPTION>
JANUARY 1 TWELVE MONTHS
YEAR ENDED THROUGH ENDED
DECEMBER 31, SEPTEMBER 28, SEPTEMBER 28,
1995 1996 1996
------------ ------------- -------------
<S> <C> <C> <C>
Elimination of Wesley Jessen
and Barnes-Hind historical
interest expense............. ($6,623) ($2,699) ($4,942)
Elimination of Wesley Jessen
historical amortization of
capitalized financing fees... (291) (436) (581)
Interest on borrowings under
the Bank Credit Agreement:
Revolving credit facility at
LIBOR plus 2.75% (8.19% on
$10.0 million assumed aver-
age balance)............... 819 614 819
Term Loan A at LIBOR plus
2.75% (8.19% on $45.0 mil-
lion)...................... 3,686 2,764 3,686
Term Loan B at LIBOR plus
3.25% (8.69% on $50.0 mil-
lion)...................... 4,345 3,259 4,345
Interest on the Pilkington
Note at the stated rate (8%
on $5.0 million)............. 400 300 400
Commitment fee on pro forma
unutilized revolving credit
facility (.50% on $35.0
million assumed average
unutilized balance).......... 175 131 175
Amortization of capitalized
deferred financing fees re-
lated to the refinancing of
the Bank Credit Agreement
($7.8 million over an average
6-year period)............... 1,296 972 1,296
------- ------- -------
Net increase in pro forma in-
terest expense............... $3,807 $4,905 $5,198
======= ======= =======
</TABLE>
(i) Represents the elimination of corporate financing fees charged by
Schering-Plough to the Predecessor.
(j) Represents the elimination of the pro forma combined historical income tax
(expense) benefit and the inclusion of the income tax (expense) benefit
resulting from the pro forma adjustments to pro forma income (loss) before
taxes to arrive at an estimated ultimate effective income tax rate of 40%.
Significant tax benefits, in the form of a tax credit, are available for
companies with operations in Puerto Rico, where one of Wesley Jessen's
principal manufacturing facilities is located. The amount of such
qualified credit to the Company, which would offset future federal income
taxes payable in any period, is dependent on the Company's labor
expenditures, depreciation and other factors in Puerto Rico. Recent
legislation will phase out this tax credit through December 31, 2005.
(k) Represents the elimination of the historical annual management fee paid by
the Company to Bain Capital for management and advisory services due to
the anticipated termination of the Advisory Agreement in connection with
the Offering.
26
<PAGE>
(l) Represents the reduction of pro forma interest expense resulting from the
refinancing of the Bank Credit Agreement and the use of a portion of the
net proceeds from the Offering to repay pro forma outstanding debt, as
follows:
<TABLE>
<CAPTION>
JANUARY 1 TWELVE MONTHS
YEAR ENDED THROUGH ENDED
DECEMBER 31, SEPTEMBER 28, SEPTEMBER 28,
1995 1996 1996
------------ ------------- --------------
<S> <C> <C> <C>
(i) Elimination of pro forma
interest under the Bank
Credit Agreement........... $(9,025) $(6,768) $(9,025)
(ii) Elimination of pro forma
interest under the
Pilkington Note........... (400) (300) (400)
(iii) Elimination of pro forma
amortization of capital-
ized financing fees...... (1,296) (972) (1,296)
(iv) Interest on borrowings un-
der the New Bank Credit
Agreement:
Revolving credit facility at
LIBOR plus 1.0% (6.44% on
$10.0 million assumed
average balance)........... 644 483 644
Term Loan A at LIBOR plus
1.0% (6.44% on $67.0
million)................... 4,315 3,236 4,315
Interest on pro forma
unutilized revolving credit
facility commitment........ 175 131 175
(v) Amortization of capital
fees related to the New
Bank Credit Agreement
($2.0 million over an average
6-year period)............... 333 250 333
------- ------- -------
Net decrease in pro forma in-
terest expense.............. $(5,254) $(3,940) $(5,254)
======= ======= =======
</TABLE>
(m) Reflects the events described in (i) through (vi) in the first paragraph
under the heading "Unaudited Pro Forma Financial Data" above, as if such
transactions had occurred on January 1, 1995 (includes all Common Stock
equivalents).
27
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 28, 1996
(dollars in thousands)
<TABLE>
<CAPTION>
ADJUSTMENTS
--------------------------
BARNES-
COMPANY HIND PRO FORMA
SEPTEMBER 28, OCTOBER 1, SEPTEMBER 28,
1996 1996 COMBINED ACQUISITIONS OFFERING 1996
------------- ---------- -------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equiva-
lents................ $ 7,836 $ 1,437 $ 9,273 $(7,346)(a) $ -- $ 2,706
779 (i)
Accounts receivable--
trade, net........... 17,245 23,220 40,465 -- -- 40,465
Other receivables..... 1,264 -- 1,264 -- -- 1,264
Inventories, net...... 14,020 29,863 43,883 23,890 (b) -- 43,883
(23,890)(c)
Deferred income taxes. 6,524 -- 6,524 4,198 (b)(f) 2,000 (n) 27,962
9,556 (c) 67 (n)
1,400 (h) 3,111 (p)
1,106 (j)
Prepaid expenses...... 4,870 5,733 10,603 -- -- 10,603
------- ------- -------- ------- ------- --------
Total current as-
sets............... 51,759 60,253 112,012 9,693 5,178 126,883
------- ------- -------- ------- ------- --------
Property, plant and
equipment, net......... 4,587 35,470 40,057 (6,677)(b)(d) -- 33,380
Other assets............ -- 554 554 -- -- 554
Deferred income taxes... 4,132 -- 4,132 -- -- 4,132
Capitalized financing
fees, net.............. 2,765 -- 2,765 (2,765)(j) (7,778)(p) 2,000
7,778 (e)(j) 2,000 (q)
------- ------- -------- ------- ------- --------
Total assets........ $63,243 $96,277 $159,520 $ 8,029 $(600) $166,949
======= ======= ======== ======= ======= ========
LIABILITIES, STOCKHOLD-
ERS' EQUITY
AND PARENT COMPANY IN-
VESTMENT:
Current liabilities:
Trade accounts pay-
able................. $ 3,617 $13,422 $ 17,039 $ -- $ -- $ 17,039
Accrued compensation
and benefits......... 8,780 5,520 14,300 -- -- 14,300
Accrued advertising... 4,753 -- 4,753 -- -- 4,753
Other accrued liabili-
ties................. 8,373 12,418 20,791 (7,346)(a) -- 37,345
20,400 (b)(g)
3,500 (h)
Income taxes payable.. 2,504 889 3,393 -- -- 3,393
Current portion of
long-term debt....... 2,000 -- 2,000 (2,000)(i) (1,555)(o) 1,555
1,555 (i) 1,555 (o)
------- ------- -------- ------- ------- --------
Total current lia-
bilities........... 30,027 32,249 62,276 16,109 -- 78,385
------- ------- -------- ------- ------- --------
Negative goodwill,
net.................. 10,773 -- 10,773 -- -- 10,773
Long-term debt, less
current maturities... 26,500 -- 26,500 (26,500)(b)(i) (95,000)(n)(o) 67,000
95,000 (b)(i) 67,000 (o)
Pilkington Note....... -- -- -- 5,000 (b)(i) 167 (n) --
(5,167)(n)(o)
Other liabilities..... -- 541 541 -- -- 541
------- ------- -------- ------- ------- --------
Total liabilities... 67,300 32,790 100,090 89,609 (33,000) 156,699
------- ------- -------- ------- ------- --------
Stockholder's equity:
Class L common stock.. 3 -- 3 -- (3)(l) --
Common stock.......... 40 -- 40 -- 3 (l) 495
452 (m)
Additional paid-in
capital.............. 7,754 -- 7,754 -- 44,715 (m) 52,469
Accumulated deficit... (11,854) -- (11,854) (14,334)(c) (8,000)(n) (42,714)
(2,100)(h) (100)(n)
(1,659)(j) (4,667)(p)
------- ------- -------- ------- ------- --------
Total stockholders'
equity (deficit)... (4,057) -- (4,057) (18,093) 32,400 12,250
------- ------- -------- ------- ------- --------
Parent company invest-
ment................. -- 63,487 63,487 (63,487)(k) -- --
------- ------- -------- ------- ------- --------
Total liabilities
and stockholders'
equity and parent
company invest-
ment.............. $63,243 $96,277 $159,520 $ 8,029 $ (600) $166,949
======= ======= ======== ======= ======= ========
</TABLE>
See accompanying notes.
28
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(dollars in thousands)
The Unaudited Pro Forma Balance Sheet gives effect to the following
unaudited pro forma adjustments:
(a) Represents the estimated drawdown in cash to fund certain liabilities
assumed by the Company related to the Barnes-Hind Acquisition (which were
included in the Barnes-Hind balance sheet at October 1, 1996) which were
required to be paid immediately after the closing.
(b) Reflects the Company's preliminary allocation of purchase price in
accordance with the purchase method of accounting as follows:
<TABLE>
<S> <C>
Purchase Price:
Cash consideration ........................................... $57,418
Pilkington Note .............................................. 5,000
Acquisition related fees and expenses ........................ 2,080
-------
Total ...................................................... $64,498
=======
Allocated as Follows:
Existing book value of Barnes-Hind............................ $63,487
Increase in inventory to estimated fair market value (see note
(c))......................................................... 23,890
Increase in deferred tax assets .............................. 4,198
Write-down of property, plant and equipment--attributable to
purchase
accounting................................................... (6,677)
Acquisition and reorganization related liabilities............ (20,400)
-------
Total....................................................... $64,498
=======
</TABLE>
In connection with the Barnes-Hind Acquisition, the Company entered into a
voluntary consent order with the FTC, which provides, among other things,
that the Company must divest the U.S. Natural Touch Product Line by January
24, 1997. The Company is currently evaluating divestiture opportunities.
Should an agreement to divest be reached in the near future, the above
purchase accounting would be revised to include a revaluation of the assets
associated with the U.S. Natural Touch Product Line so that no gain or loss
would result from such divestiture, as is required under generally accepted
accounting principles.
The Barnes-Hind Acquisition is subject to an acquisition audit which could
result in a purchase price adjustment. This adjustment, if any, will,
increase or decrease the purchase price and will be recorded upon
completion of the audit. The Company's management does not expect the
adjustment to have a material impact on the preliminary allocation of
purchase price.
(c) Represents the estimated write-up to fair market value of $23,890 for
work-in-process and finished goods inventory in connection with the
purchase price allocation (see note (b) above), and the recognition of
$23,890 in increased cost of goods sold expected in the fourth quarter of
fiscal 1996 and the first and second quarters of fiscal 1997. For
purposes of the pro forma consolidated balance sheet, the impact of the
higher cost of goods sold as a result of the write-up is charged directly
to accumulated deficit, net of $9,556 of related federal income tax
benefit (at a 40% effective rate). The effect of this non-recurring
charge resulting from the Barnes-Hind Acquisition is not reflected in the
accompanying Unaudited Pro Forma Statements of Operations, as presented.
(d) Reflects the write-down in property, plant and equipment of $6,677 as a
result of the Company's application of purchase accounting whereby the
excess of the fair market value of the net assets acquired over the
purchase price was allocated as a reduction to the fair market value of
the Barnes-Hind property, plant and equipment as is required by generally
accepted accounting principles.
(e) Represents fees and expenses relating primarily to the execution of the
Bank Credit Agreement in connection with the Barnes-Hind Acquisition.
29
<PAGE>
(f) Reflects the application of SFAS No. 109, "Accounting for Income Taxes,"
in accordance with the purchase method of accounting as set forth below
(gross temporary differences resulting from the application of purchase
accounting and other pro forma adjustments, tax effected at an estimated
statutory income tax rate of 40%).
(g) Represents the costs to close certain Barnes-Hind facilities including
lease termination, severance and relocation liabilities, totaling
$20,400, incurred as a direct result of the Barnes-Hind Acquisition.
(h) Represents the total restructuring costs of $3,500 to close certain
Wesley Jessen facilities, including lease termination, severance and
relocation liabilities, before $1,400 of related federal income tax
benefit (at a 40% effective tax rate), as a direct result of the Barnes-
Hind Acquisition. The net impact on the accumulated deficit is $2,100.
(i) Reflects the repayment of indebtedness under the Company's then existing
credit agreement, the incurrence of new indebtedness under the Bank
Credit Agreement and the issuance of the Pilkington Note, as follows:
<TABLE>
<S> <C>
Repayment of indebtedness under the then existing credit
agreement.................................................... $(28,500)
Borrowings under the New Bank Credit Agreement:
Revolving Credit Facility.................................... 1,555
Term Loan A.................................................. 45,000
Term Loan B.................................................. 50,000
Issuance of Pilkington Note................................... 5,000
--------
Net increase in indebtedness.................................. $ 73,055
========
</TABLE>
(j) Represents the write-off of $2,765 in capitalized financing costs, before
$1,106 of related federal income tax benefit (at a 40% effective tax
rate), resulting in an extraordinary loss of $1,659 in connection with
the financing of the Barnes-Hind Acquisition (see note (i) above).
(k) Reflects the elimination of Barnes-Hind's historical parent company
investment resulting from the application of purchase accounting in
connection with the Barnes-Hind Acquisition.
(l) Adjusted to give effect to the Reclassification and Stock Split.
(m) Reflects the estimated net proceeds of the Offering to the Company of
$45,167, net of the estimated underwriting discount and offering expenses
totalling $4,833.
(n) Reflects the use of the net proceeds, as follows:
<TABLE>
<S> <C>
Repayment of a portion of the Term Loan B outstanding under the
Bank Credit Agreement ......................................... $30,000
Repayment of the Pilkington Note, including accrued interest ... 5,167
Fee payable to Bain Capital to terminate the Advisory Agreement. 10,000
-------
Net proceeds to the Company..................................... $45,167
=======
</TABLE>
As a result of the termination of the Advisory Agreement noted above, the
Company will incur a $10,000 non-recurring charge which has been reflected
in accumulated deficit, before a related applicable federal income tax
benefit. In addition, an interest charge of $167, before a related federal
tax benefit, will be incurred in connection with the repayment of the
Pilkington Note and related accrued interest.
30
<PAGE>
(o) Reflects the repayment of indebtedness under the Bank Credit Agreement,
the repayment of the Pilkington Note (including accrued interest of
$167), and the incurrence of new indebtedness under the New Bank Credit
Agreement, in connection with the Offering, as follows:
<TABLE>
<S> <C>
Repayment of indebtedness under the Bank Credit Agreement, as
follows:
Revolving Credit Facility.................................. $ (1,555)
Term Loan A................................................ (45,000)
Term Loan B................................................ (50,000)
Repayment of the Pilkington Note, including accrued interest. (5,167)
Borrowings under the New Bank Credit Agreement:
Revolving Credit Facility.................................. 1,555
Term Loan.................................................. 67,000
--------
Net decrease in indebtedness............................. $(33,167)
========
</TABLE>
(p) Represents the write-off of $7,778 in capitalized financing costs, before
$3,111 of related federal income tax benefit (at a 40% effective tax
rate), resulting in an extraordinary loss of $4,667 in connection with
the paydown of outstanding debt under the Bank Credit Agreement in
connection with the Offering.
(q) Represents estimated fees and expenses relating to the New Bank Credit
Agreement in connection with the Offering.
31
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(dollars in thousands)
THE COMPANY/PREDECESSOR
Set forth below are selected historical consolidated financial data of the
Predecessor and the Company for the dates and for the periods indicated. The
selected historical consolidated financial data of the Predecessor as of
December 31, 1993 and 1994 and for the years ended December 31, 1993 and 1994
and the period from January 1, 1995 through June 28, 1995 were derived from
the historical financial statements of the Predecessor that were audited by
Price Waterhouse LLP, whose report appears elsewhere in this Prospectus. The
selected historical consolidated financial data of the Company as of December
31, 1995 and September 28, 1996 and for the periods June 29, 1995 through
December 31, 1995 and January 1, 1994 through September 28, 1996 were derived
from the historical financial statements of the Company that were audited by
Price Waterhouse LLP, whose report appears elsewhere in this Prospectus. The
selected historical consolidated financial data of the Predecessor for the
years ended December 31, 1991 and 1992 have not been audited. Results for
interim periods are not necessarily indicative of results for the full year.
Such interim results include all adjustments, consisting only of normal
recurring adjustments, which management considers necessary for fair
presentation of results for such periods and should be read in conjunction
with, and are qualified by reference to, "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the audited consolidated
financial statements and accompanying notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
THE THE
PREDECESSOR COMPANY COMBINED (A) COMPANY
------------------------------------------------- ------------ ----------------------- ---------
YEAR ENDED DECEMBER 31, JANUARY 1 JUNE 29 JANUARY 1 JANUARY 1
-------------------------------------- THROUGH THROUGH YEAR ENDED THROUGH THROUGH
JUNE 28, DECEMBER 31, DECEMBER 31, SEPTEMBER SEPTEMBER
1991 1992 1993 1994 1995 1995 1995 30, 1995 28, 1996
-------- -------- -------- -------- --------- ------------ ------------ ---------- ---------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............. $114,783 $111,030 $103,386 $109,640 $ 51,019 $ 54,315 $105,334 $78,077 $96,048
Operating costs and
expenses:
Cost of goods sold... 35,303 37,524 56,780 65,591 20,871 19,916 38,442 28,202 26,471
Costs of goods sold--
inventory step-up . -- -- -- -- -- 33,929 -- -- 6,626
Marketing and admin-
istrative........... 49,596 58,350 59,764 79,185 43,236 29,476 69,162 53,042 51,014
Research and develop-
ment ............... 9,430 11,029 10,286 9,843 4,569 2,524 4,677 3,471 3,786
Amortization of
intangible assets
(negative goodwill). 6,132 6,094 5,472 5,472 2,736 (392) (784) (588) (588)
-------- -------- -------- -------- -------- -------- -------- ------- -------
Income (loss) from
operations.......... 14,322 (1,967) (28,916) (50,451) (20,393) (31,138) (6,163) (6,050) 8,739
Other (income) ex-
penses:
Interest expense..... -- -- -- -- -- 2,599 4,889 3,742 2,757
Financing charge .... 7,391 8,021 6,886 7,172 3,511 -- -- -- --
Other income, net ... 1,728 (4,078) (256) (202) (1,360) -- (1,360) (1,360) (3,500)
-------- -------- -------- -------- -------- -------- -------- ------- -------
Income (loss) before
income taxes......... 5,203 (5,910) (35,546) (57,421) (22,544) (33,737) (9,692) (8,432) 9,482
Income tax (expense)
benefit.............. (2,081) 2,364 17,214 26,935 9,401 14,022 4,032 3,508 (1,621)
-------- -------- -------- -------- -------- -------- -------- ------- -------
Net income (loss) (b). $ 3,122 $ (3,546) $(18,332) $(30,486) $(13,143) $(19,715) $ (5,660) $(4,924) $ 7,861
======== ======== ======== ======== ======== ======== ======== ======= =======
OTHER DATA:
EBITDA (c)............ $ 24,279 $ 9,047 $(17,408) $(37,391) $(13,786) $ 2,399 $ (6,947) $(6,638) $14,936
Depreciation and amor-
tization, net of neg-
ative goodwill....... 9,957 11,014 11,508 13,060 6,607 (392) (784) (588) (429)
Capital expenditures . 20,131 32,149 25,297 3,187 1,959 893 2,852 2,148 3,657
<CAPTION>
DECEMBER DECEMBER DECEMBER SEPTEMBER
31, 1993 31, 1994 31, 1995 28, 1996
BALANCE SHEET DATA: -------- -------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Working capital ...... $ 42,539 $ 30,940 $ 30,262 $21,732
Total assets.......... 214,747 191,429 67,330 63,243
Total debt............ -- -- 42,000 28,500
Stockholders' equity.. 196,243 173,409 (12,190) (4,057)
</TABLE>
32
<PAGE>
- --------
(a) The combined operating results for the year ended December 31, 1995 and
the nine months ended September 30, 1995 combine the operations of the
Predecessor from January 1, 1995 through June 28, 1995 and the Company
from June 29, 1995 through the end of the respective period and have been
adjusted to reflect the period as if the Wesley Jessen Acquisition and
related financing transaction had occurred on January 1, 1995. The
combined results include pro forma adjustments for (i) interest expense
associated with the financing of the Wesley Jessen Acquisition; (ii)
actual cost savings relating to the reduction of certain operating
expenses including the consolidation of corporate offices, a reduction in
the number of corporate level employees and related expenses,
consolidation of marketing support facilities, and the rationalization of
the international sales and marketing functions; (iii) elimination of the
inventory step-up; and (iv) a reduction in depreciation and amortization
expense as a result of the Company's applications of purchase accounting.
Because of the purchase accounting adjustments made to the Predecessor's
financial statements, the financial statements of the Predecessor for the
periods prior to June 29, 1995 are not comparable to those of subsequent
periods. The combined pro forma data are intended to assist in making
comparisons for periods prior to the Barnes-Hind Acquisition. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the Notes to Consolidated Financial Statements of the
Company included herein.
(b) No historical earnings per share data are presented as the Company does
not consider such data to be meaningful. See "Unaudited Pro Forma
Financial Data" and "The Reclassification."
(c) "EBITDA" is defined herein as income from operations plus depreciation and
amortization expense, non-recurring charges and other non-cash expense
items. The Company understands that while EBITDA is frequently used by
security analysts in the evaluation of companies, it is not necessarily
comparable to other similarly titled captions of other companies due to
potential inconsistencies in the method of calculation. EBITDA is not
intended as an alternative to cash flow from operating activities as a
measure of liquidity, an alternative to net income as an indicator of the
Company's operating performance or any other measure of performance in
accordance with generally accepted accounting principles.
33
<PAGE>
BARNES-HIND
Set forth below are summary historical combined financial data of Barnes-
Hind for the dates and for the periods indicated. The summary historical
combined financial data as of March 31, 1995 and 1996 and for the periods then
ended were derived from the historical financial statements of Barnes-Hind
that were audited by Coopers & Lybrand L.L.P., whose report appears elsewhere
in this Prospectus. Financial data presented herein includes the financial
data associated with the U.S. Natural Touch Product Line, which the Company
intends to divest in compliance with a consent order entered into with the
FTC. See "Business--Required Divestiture." The U.S. Natural Touch Product Line
generated approximately $6.9 million of net sales for the year ended March 31,
1996. The Company does not believe that the disposition of the U.S. Natural
Touch Product Line will have a material impact on the Company's results of
operations. The summary historical financial data set forth below should be
read in conjunction with, and are qualified by reference to, the audited
financial statements and accompanying notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED MARCH
31,
------------------
1995 1996
-------- --------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................................. $124,994 $132,581
Costs and expenses:
Cost of sales............................................ 62,435 63,341
Research and development................................. 10,317 7,884
Selling and marketing.................................... 37,609 43,292
General and administrative............................... 21,516 22,536
-------- --------
Operating income (loss).................................. (6,883) (4,472)
Interest income............................................ 615 773
Interest expense........................................... (4,623) (4,315)
-------- --------
Income (loss) before provision for income taxes............ (10,891) (8,014)
Income tax expense......................................... 2,708 3,116
-------- --------
Net income (loss).......................................... $(13,599) $(11,130)
======== ========
OTHER DATA:
EBITDA (a)................................................. $ (134) $ (455)
Depreciation and amortization.............................. 6,749 4,017
Capital expenditures....................................... 12,899 13,572
<CAPTION>
MARCH 31,
------------------
1995 1996
-------- --------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital (deficiency)............................... $(36,364) $ 43,509
Total assets............................................... 102,313 112,184
Total debt................................................. 90,868 10,414
Parent company investment (deficit)........................ (18,738) 70,680
</TABLE>
- --------
(a) "EBITDA" is defined herein as income from operations plus depreciation and
amortization expense, non-recurring charges and other non-cash expense
items. The Company understands that while EBITDA is frequently used by
security analysts in the evaluation of companies, it is not necessarily
comparable to other similarly titled captions of other companies due to
potential inconsistencies in the method of calculation. EBITDA is not
intended as an alternative to cash flow from operating activities as a
measure of liquidity, an alternative to net income as an indicator of the
Company's operating performance or any other measure of performance in
accordance with generally accepted accounting principles.
34
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management's discussion and analysis provides information with
respect to the results of operations of the Predecessor for the years ended
December 31, 1993 and 1994 and the period from January 1, 1995 through June
28, 1995 and the Company for the period from June 29, 1995 through December
31, 1995 and for the period from January 1, 1996 through September 28, 1996
(the "nine months ended September 28, 1996"). The Company completed the Wesley
Jessen Acquisition on June 28, 1995. The Wesley Jessen Acquisition was
accounted for under the purchase method of accounting. Because of the
revaluation of the assets and liabilities of the Predecessor and the related
impacts on costs of sales and expenses, the financial statements of the
Predecessor are not directly comparable to those of the Company. For
comparative purposes, the combined results of operations of the Predecessor
and the Company for the year ended December 31, 1995 and for the period
January 1, 1995 through September 30, 1995 have been set forth on a pro forma
basis as if the Wesley Jessen Acquisition had occurred on January 1, 1995.
OVERVIEW
Wesley Jessen is the leading worldwide developer, manufacturer and marketer
of specialty soft contact lenses. The Company's products include cosmetic
lenses, which change or enhance the wearer's eye color appearance; toric
lenses, which correct vision for people with astigmatism; and premium lenses,
which offer value-added features such as improved comfort for dry eyes and
protection from UV light. Founded in 1946 by pioneers in the contact lens
industry, the Company has a long-standing reputation for innovation and new
product introductions. Wesley Jessen develops technology, manufacturing
processes and products through a combination of its in-house staff of more
than 50 engineers and scientists and Company-sponsored research by third-party
experts. The Company markets and sells its products (i) to consumers through
the second largest advertising campaign in the industry and (ii) to eyecare
practitioners through its 180-person salesforce and network of 60 independent
distributors, which together sell the Company's products in more than 75
countries.
On June 28, 1995, Bain Capital and management acquired the Company in the
Wesley Jessen Acquisition. The purchase price in the Wesley Jessen Acquisition
of $47.0 million (plus fees and expenses of $3.5 million) was funded with $7.5
million of equity and $43.0 million of borrowings under a bank credit
agreement. The Wesley Jessen Acquisition was accounted for under the purchase
method of accounting, including an increase in the book value of the inventory
which was charged to cost of goods sold. After the Wesley Jessen Acquisition,
the Company's new management team pursued an aggressive strategy of cost
savings and revenue enhancement to improve the Company's results of
operations. During this period, management (i) redefined the Company's
disposable lens marketing strategy by repricing and repackaging the Company's
products to be more competitive with industry standards; (ii) launched a
national consumer advertising campaign featuring Christy Turlington; (iii)
expanded its product offerings in its FreshLook line of disposable colored
contact lenses; (iv) heightened its sales and marketing focus on serving the
needs of eyecare practitioners; and (v) achieved substantial cost savings
through personnel reductions, decreased overall marketing and advertising
expenses, consolidation of facilities and increased operating efficiencies. As
a result of management's efforts, the Company's profitability and results of
operations have improved significantly. The Company's EBITDA increased from a
loss of $13.8 million in the period from January 1, 1995 through June 28, 1995
to income of $14.9 million for the nine months ended September 28, 1996.
BARNES-HIND ACQUISITION
On October 2, 1996, the Company acquired substantially all the assets and
assumed certain liabilities of Barnes-Hind from Pilkington. The purchase price
in the Barnes-Hind Acquisition of approximately $62.4 million (plus related
acquisition and financing fees of $9.9 million) was funded with approximately
$67.3 million of borrowings under the $140.0 million Bank Credit Agreement and
the $5.0 million Pilkington Note. In connection with the Barnes-Hind
Acquisition, the Company borrowed an additional $29.3 million to repay its
then outstanding term loans and to fund ongoing working capital needs.
35
<PAGE>
In connection with the Barnes-Hind Acquisition, the Company has identified
significant operating synergies and is in the process of implementing certain
cost reduction measures that are expected to improve the Company's operating
results. While Wesley Jessen and Barnes-Hind had approximately equivalent net
sales in the twelve months ended September 28, 1996, Wesley Jessen employed
approximately 1,000 persons as of that date whereas Barnes-Hind employed
approximately 1,600 persons. Consequently, the Company believes that
substantial cost savings are available through personnel reductions. In
addition, the Company is in the process of moving the operations currently
performed at Barnes-Hind's Sunnyvale, California facility to the Company's
facility in Des Plaines, Illinois.
The following table sets forth certain expenses incurred by Barnes-Hind in
the fiscal year ended March 31, 1996. The Company believes these expenses will
not recur in future periods as a result of the cost reduction measures
implemented or being implemented by the Company. The adjustments are reflected
in the Company's unaudited pro forma financial data. See "Unaudited Pro Forma
Financial Data." While the Company believes that the following expenses will
not recur, there can be no assurance that the Company will be able to achieve
such cost savings in future periods.
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31, 1996
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Cost savings by category:
Wages and related personnel costs ............... $11,757
Facilities and related expenses.................. 3,648
-------
Total ......................................... $15,405
=======
</TABLE>
The Barnes-Hind Acquisition will affect the Company's results of operations
in certain significant respects. The aggregate acquisition cost (including
assumption of debt) will be allocated to the net assets acquired based on the
fair market value of such net assets. The preliminary allocation of the
purchase price relating to the Barnes-Hind Acquisition resulted in a decrease
in the historical book value of certain assets such as property, plant and
equipment, which will result in a decrease in annual depreciation expense of
$0.9 million on a pro forma basis for the twelve months ended September 28,
1996. Further, the Company anticipates that the value of finished goods
inventory will be increased by an amount not to exceed $24.0 million, which is
expected to be charged to cost of goods sold in the period from October 2,
1996 through June 30, 1997. In addition, due to the effects of the increased
borrowings of the Company to finance the Barnes-Hind Acquisition, the
Company's interest expense will be increased significantly in periods
following the acquisition.
As a result of the Barnes-Hind Acquisition, the Company expects to incur
significant non-recurring charges in the fourth quarter of fiscal 1996 and the
first and second quarters of fiscal 1997, including: (i) approximately $3.5
million of restructuring expenses expected to be incurred by the Company
following the Barnes-Hind Acquisition; (ii) a non-cash increase in cost of
goods sold which is not expected to exceed approximately $24.0 million (based
on Barnes-Hind's inventory at October 1, 1996); and (iii) extraordinary debt
extinguishment costs consisting of $2.8 million related to writing off
historical capitalized financing fees in connection with the refinancing of
the Company's then existing credit agreement. In connection with the Offering,
the Company expects to incur the following non-recurring charges in the first
quarter of 1997: (i) an expense of approximately $10.0 million representing
the fee payable to Bain Capital in connection with the termination of the
Advisory Agreement and (ii) extraordinary debt extinguishment costs consisting
of $7.8 million related to writing off capitalized financing fees in
connection with the refinancing of the Bank Credit Agreement upon the
completion of the Offering. As a result of these charges, the Company expects
to report net losses in both the fourth quarter of 1996 and the first quarter
of 1997.
36
<PAGE>
RESULTS OF OPERATIONS
The Company was established to acquire the Predecessor, which acquisition
was effective for accounting purposes on June 29, 1995. Because of the
revaluation of the assets and liabilities of the Predecessor and the related
impact on cost of sales and expenses, the financial statements of the
Predecessor for periods prior to June 29, 1995 are not comparable to those of
subsequent periods. In order to facilitate management's discussion of
financial results, the following table of adjusted operating income data
combines 1995 data for the Predecessor and the Company on a pro forma basis
and gives effect to the Wesley Jessen Acquisition as if it had occurred on
January 1, 1995. The cost of goods sold for the nine months ended September
28, 1996 does not reflect the impact of the $6.6 million increase in cost of
goods sold as a result of writing up the book value of inventory and the
related tax benefit of $2.3 million in conjunction with the Wesley Jessen
Acquisition.
ADJUSTED OPERATING INCOME DATA
(as a percentage of net sales)
<TABLE>
<CAPTION>
PREDECESSOR COMBINED (A) COMPANY
----------------- ------------------------ -------------
YEAR ENDED
DECEMBER 31, NINE MONTHS ENDED
------------------------- ---------------------------
SEPTEMBER 30, SEPTEMBER 28,
1993 1994 1995 1995 1996
-------- -------- ------- ------------- -------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............... 100.0% 100.0% 100.0% 100.0% 100.0%
Operating costs and
expenses:
Cost of goods sold..... 54.9 59.8 36.5 36.1 27.6
Marketing and
administrative......... 57.8 72.2 65.7 67.9 53.1
Research and
development............ 9.9 9.0 4.4 4.4 3.9
Amortization of
intangible assets
(negative goodwill).... 5.3 5.0 (0.7) (0.7) (0.6)
-------- -------- ------- -------- -------
Income (loss) from
operations............. (27.9) (46.0) (5.9) (7.7) 16.0
Other (income) expense:
Interest expense....... -- -- 4.6 4.8 2.9
Financing charge ...... 6.7 6.5 -- -- --
Other income, net ..... (0.2) (0.1) (1.3) (1.7) (3.6)
-------- -------- ------- -------- -------
Income (loss) before
income taxes............ (34.4) (52.4) (9.2) (10.8) 16.7
Income tax (expense)
benefit ................ 16.7 24.6 3.8 4.5 (4.0)
-------- -------- ------- -------- -------
Net income (loss)....... (17.7)% (27.8)% (5.4)% (6.3)% 12.7%
======== ======== ======= ======== =======
OTHER DATA:
EBITDA (b).............. (16.8)% (34.1)% (6.6)% (8.5)% 15.6%
Depreciation and
amortization............ 11.1 11.9 (0.7) (0.7) (0.4)
Capital expenditures.... 24.5 2.9 2.7 2.8 3.8
</TABLE>
- --------
(a) The combined results include pro forma adjustments for (i) interest
expense associated with the financing of the Wesley Jessen Acquisition;
(ii) actual cost savings relating to the reduction of certain operating
expenses including the consolidation of corporate offices, a reduction in
the number of corporate-level employees and related expenses,
consolidation of marketing support facilities and the rationalization of
the international sales and marketing functions; (iii) elimination of the
inventory step-up; and (iv) a reduction in depreciation and amortization
expense as a result of the Company's application of purchase accounting.
Because of the purchase accounting adjustments made to the Predecessor's
financial statements, the financial statements of the Predecessor for the
periods prior to June 29, 1995 are not comparable to those of subsequent
periods. The combined pro forma data are intended to assist in making
comparisons, excluding the Barnes-Hind Acquisition.
(b) "EBITDA" is defined herein as income from operations plus depreciation and
amortization expense, non-recurring charges and other non-cash expense
items. The Company understands that while EBITDA is frequently used by
security analysts in the evaluation of companies, it is not necessarily
comparable to other similarly titled captions of other companies due to
potential inconsistencies in the method of calculation. EBITDA is not
intended as an alternative to cash flow from operating activities as a
measure of liquidity, an alternative to net income as an indicator of the
Company's operating performance or any other measure of performance in
accordance with generally accepted accounting principles.
37
<PAGE>
COMPANY NINE MONTHS ENDED SEPTEMBER 28, 1996 COMPARED TO UNAUDITED PRO FORMA
COMBINED NINE MONTHS ENDED SEPTEMBER 30, 1995
The discussion that follows compares the Company's results of operations for
the nine months ended September 28, 1996 to the pro forma combined results of
operations for the nine months ended September 30, 1995, which give effect to
the Wesley Jessen Acquisition as if it had occurred as of January 1, 1995.
Net sales for the nine months ended September 28, 1996 increased $18.0
million, or 23.0%, to $96.0 million from $78.1 million for the nine months
ended September 30, 1995. This increase resulted primarily from growth in sales
of the Company's disposable contact lenses, from $9.4 million to $25.3 million,
a 169.2% increase. Sales growth in this product category was principally due to
unit volume growth, driven by new marketing programs and the continued
penetration of the Company's cosmetic lenses. Net sales of conventional lenses
increased 3.0% from $68.7 million to $70.8 million, largely due to price
increases. The Company believes sales increases were due to a significant
increase in the total number of wearers and increased revenue per wearer as a
result of the increased popularity of the Company's disposable lenses. Sales in
North America grew 20.2% from $51.6 million to $62.0 million, while sales in
the rest of the world grew 28.4% from $26.5 million to $34.0 million.
Gross profit, excluding the inventory step-up, for the nine months ended
September 28, 1996 increased $19.7 million, or 39.5%, to $69.6 million from
$49.9 million in the comparable 1995 period. Gross profit margin increased to
72.4% for the nine months ended September 28, 1996 from 63.9% in the comparable
period. This improvement reflects the cost savings that resulted from improved
plant utilization, personnel reductions and other operating efficiencies. Gross
profit in the nine months ended September 30, 1995 was negatively impacted by a
write-off of $2.2 million related to conventional lens inventory that was
produced prior to the Wesley Jessen Acquisition and that did not meet new
management's higher standards for customer satisfaction. Excluding this effect,
gross margins for the nine months ended September 30, 1995 would have been
66.7%.
Marketing and administrative expenses for the nine months ended September 28,
1996 decreased by $2.0 million, or 3.8%, to $51.0 million from $53.0 million
for the nine months ended September 30, 1995. As a percentage of net sales,
marketing and administrative expenses decreased to 53.1% in the 1996 period
from 67.9% in the 1995 period. This savings is largely due to a decline in
promotional spending and reductions in staffing as a result of the Wesley
Jessen Acquisition. While overall marketing expenditures decreased, the Company
has successfully increased the impact of its promotional expenditures through
the implementation of its two-pronged marketing strategy. This strategy, put in
place in the third and fourth quarters of 1995, involves an extensive consumer
advertising campaign and targeted marketing to eyecare practitioners.
Research and development expenses for the nine months ended September 28,
1996 increased by $0.3 million, or 9.0%, to $3.8 million from $3.5 million for
the nine months ended September 30, 1995. As a percentage of net sales,
research and development expenses for the nine months ended September 28, 1996
decreased to 3.9% from 4.4% in the prior year period.
Income from operations for the nine months ended September 28, 1996 increased
by $14.8 million to $8.7 million from a loss of $6.1 million for the nine
months ended September 30, 1995. Income from operations in the 1996 period was
reduced by $6.6 million of amortization related to the inventory step-up in the
Wesley Jessen Acquisition. Excluding the impact of the inventory step-up,
income from operations would have increased $21.4 million to $15.4 million from
a $6.1 million loss in the comparable period. Most of this increase resulted
from the substantial improvement in the Company's gross margin resulting from
improved plant utilization and overall cost reductions.
38
<PAGE>
Interest expense for the nine months ended September 28, 1996 decreased by
$1.0 million, to $2.8 million, from $3.7 million for the nine months ended
September 30, 1995. This decrease is primarily attributable to a decrease in
overall leverage due to the reduction of debt from operating cash flow.
Other income for the nine months ended September 28, 1996 includes $3.5
million of non-recurring income relating to the May 1996 grant of a license to
a third party relating to one of the Company's patents. Other income for the
nine months ended September 30, 1995 includes $1.2 million of non-recurring
licensing income.
Income (loss) before income taxes increased $17.9 million to $9.5 million
from a $8.4 million loss in the comparable 1995 period. Excluding the $6.6
million inventory step-up included in the nine months ended September 28,
1996, income before taxes would have increased $24.5 million to $16.1 million
from a $8.4 million loss in the comparable period.
Income taxes for the nine months ended September 28, 1996 increased by $5.1
million to $1.6 million from a benefit of $3.5 million for the nine months
ended September 30, 1995. As a percentage of income (loss) before income
taxes, income tax expense was 17.1% in the 1996 period due to the favorable
impact of income tax credits derived from the Company's operations in Puerto
Rico (under Section 936 of the U.S. Internal Revenue Code). As a percentage of
income (loss) before income taxes on a pro forma basis, the income tax benefit
was 41.6% in the 1995 period.
Net income for the nine months ended September 28, 1996 increased by $12.8
million to $7.9 million from a loss of $4.9 million for the nine months ended
September 30, 1995. This increase resulted from improvement in the Company's
gross margin and tax rate, which was partially offset by the amortization
related to the inventory step-up in the 1996 period.
UNAUDITED PRO FORMA COMBINED YEAR ENDED DECEMBER 31, 1995 COMPARED TO
PREDECESSOR YEAR ENDED DECEMBER 31, 1994
Prior to June 28, 1995 the Predecessor was a wholly-owned subsidiary of
Schering-Plough. The discussion that follows compares the Company's pro forma
combined results of operations for the year ended December 31, 1995, which
give effect to the Wesley Jessen Acquisition as if it had occurred as of
January 1, 1995, to the results of operations for the Predecessor for the year
ended December 31, 1994.
Net sales for the year ended December 31, 1995 decreased by $4.3 million, or
3.9%, to $105.3 million from $109.6 million for the year ended December 31,
1994. This decline reflects: (i) the one-time positive impact in 1994 of
initial trade orders of FreshLook disposable contact lenses associated with
the product launch; (ii) price changes implemented in early 1995 (prior to the
Wesley Jessen Acquisition); and (iii) the impact of new management's efforts
to reduce high trade inventory levels following the Wesley Jessen Acquisition.
The Company believes that steps taken by management subsequent to the Wesley
Jessen Acquisition better positioned the Company for future growth and that
the number of wearers of its products increased during 1995.
Gross profit in 1995 increased by $22.9 million, or 51.9%, to $66.9 million
from $44.0 million in 1994. Gross profit margin increased to 63.5% in 1995
from 40.2% in the prior year. Gross profit in 1995 was negatively impacted by
a write-off of $2.2 million related to conventional lens inventory that was
produced prior to the Wesley Jessen Acquisition and that did not meet new
management's higher standards for customer satisfaction. Additionally, costs
of goods sold for the year ended December 31, 1995 includes $5.2 million less
depreciation than the comparable period due to the Company's application of
purchase accounting for the Wesley Jessen Acquisition. Management believes
that the gross margins recorded in 1994 are not comparable to the ongoing
level of operations of the business because of inventory write-offs and
manufacturing start-up costs incurred which were associated with the Company's
U.S. launch of disposable lenses which began in the United States in the fall
of 1994. In particular, the Company experienced substantial product returns
and inventory write-offs of first generation FreshLook lenses upon the
introduction of a second generation FreshLook lens in 1995. Gross profit in
1994 was negatively impacted by a write-off of $10.1 million of first-
generation inventory and $15.3 million of start-up costs associated with the
FreshLook launch. Excluding the impacts outlined above, gross profit would
have been $69.1 million for 1995 and $74.7 million in 1994. Gross margins
would have been 65.6% and
39
<PAGE>
68.1%, respectively. This decline is due to a shift to lower margin disposable
products as a percentage of total sales, coupled with increased price
discounts to distributors in the first half of 1995.
Marketing and administrative expenses in 1995 decreased by $10.0 million, or
12.7%, to $69.2 million from $79.2 million in 1994. As a percentage of net
sales, marketing and administrative expenses decreased to 65.7% in 1995 from
72.2% in 1994. Approximately $1.5 million of this reduction is due to a
decrease in depreciation expense associated with the 1995 write-down of fixed
assets as a result of the Company's application of purchase accounting. The
remaining cost savings are due largely to reductions in staffing as a result
of the Wesley Jessen Acquisition.
Research and development expenses in 1995 decreased by $5.2 million, or
52.5%, to $4.7 million from $9.8 million in 1994. As a percentage of net
sales, research and development expenses decreased to 4.4% in 1995 from 9.0%
in 1994. Expenses decreased due to the completion of development associated
with the launch of FreshLook disposable lenses and personnel reductions
effected in conjunction with the Wesley Jessen Acquisition.
Loss from operations for the year ended December 31, 1995 improved by $44.3
million, to a loss of $6.2 million from a loss of $50.5 million for the year
ended December 31, 1994. Most of this improvement resulted from the non-
recurrence of the write-offs and start-up manufacturing costs incurred in 1994
as a result of the FreshLook launch.
Management has not included discussions of interest expense, tax expense and
net income because they believe that these items are not reflective of the
Company's ongoing operations given the Predecessor's status during a portion
of this time period as a wholly owned subsidiary of Schering-Plough.
PREDECESSOR YEAR ENDED DECEMBER 31, 1994 COMPARED TO PREDECESSOR YEAR ENDED
DECEMBER 31, 1993
Net sales for the year ended December 31, 1994 increased $6.3 million, or
6.0%, to $109.6 million from $103.4 million in the year ended December 31,
1993. This growth resulted from the initial U.S. launch of FreshLook
disposable lenses and continued penetration of FreshLook disposable lenses
internationally.
Gross profit in 1994 decreased $2.6 million to $44.0 million from $46.6
million in 1993. Gross profit margin decreased from 45.1% in 1993 to 40.2% in
1994. Gross margins in 1993 and 1994 include substantial inventory write-offs
and manufacturing start-up costs associated with the launch of the Company's
disposable lenses in Europe in 1993 and in the United States in 1994. Gross
profit for 1994 was negatively impacted by a write-off of $10.1 million of
first generation lens inventory and $15.3 million of manufacturing start-up
costs associated with the FreshLook launch. Gross profit for 1993 was
negatively impacted by a write-off of $0.7 million of first generation lens
inventory and $17.6 million of start-up costs associated with the FreshLook
launch. Excluding these start-up losses, gross profit would have been $69.5
million in 1994 and $64.8 million in 1993. Gross margins would have been 63.4%
and 62.7%, respectively.
Marketing and administrative expenses in 1994 increased by $19.4 million, or
32.5%, to $79.2 million from $59.8 million the prior year. As a percentage of
net sales, marketing and administrative expenses increased to 72.2% in 1994
from 57.8% in 1993. Increased marketing spending for FreshLook disposable
lenses accounted for $11.8 million of this increase, with the remainder
reflecting overall increases in staffing levels.
Research and development expenses in 1994 decreased to $9.8 million from
$10.3 million in 1993. As a percentage of net sales, research and development
expenses were 9.0% in 1994, versus 9.9% in 1993.
Loss from operations decreased $21.5 million to a loss of $50.5 million in
1994 from a loss of $28.9 million in 1993. The losses in both periods
primarily reflect the write-offs and start-up manufacturing costs associated
with the launch of FreshLook disposable lenses in 1993 and 1994.
40
<PAGE>
Management has not included discussions of interest expense, tax expense and
net income because they believe that these items are not reflective of the
Company's ongoing operations given the Predecessor's status during this time
period as a wholly owned subsidiary of Schering-Plough.
BARNES-HIND
Wesley Jessen acquired all of the assets and assumed certain liabilities of
Barnes-Hind from Pilkington on October 2, 1996. The discussion that follows
compares Barnes-Hind's results of operations while under the control of
Pilkington and may not be representative of its results following its
acquisition by Wesley Jessen.
Net sales for the year ended March 31, 1996 ("fiscal 1995") increased $7.6
million, or 6.1%, to $132.6 million from $125.0 million for the year ended
March 31, 1995 ("fiscal 1994"). This increase in revenue was due to continued
growth in Barnes-Hind's disposable lenses, particularly the recently
introduced Precision UV disposable lens, which was partially offset by a
decline in the conventional lens business. Geographically, sales were
strongest in international markets due to a full year impact of Precision UV
as well as growth in private label sales in Europe and Japan.
Gross profit for fiscal 1995 increased $6.7 million, or 10.7%, to $69.2
million from $62.6 million for the prior year. Gross margins increased from
50.0% in fiscal 1994 to 52.2% in fiscal 1995 due to overhead reduction in
manufacturing and a decrease in the production cost of disposable lenses
through the increased use of automated manufacturing processes.
Research and development expenses in fiscal year 1995 decreased by $2.4
million, or 23.6%, to $7.9 million from $10.3 million in fiscal year 1994. As
a percentage of net sales, research and development expenses for fiscal 1995
decreased to 5.9% from 8.3% in fiscal 1994. This decrease was due to the
completion of primary development activities associated with the launch of
Precision UV products.
Selling and marketing expenses for fiscal 1995 increased by $5.7 million, or
15.1%, to $43.3 million from $37.6 million in fiscal 1994. As a percentage of
net sales, selling and marketing expenses increased to 32.7% from 30.1%,
largely due to increased promotional expenses from the launch of Precision UV
in the United States and its expansion into Europe. Additionally, marketing
and selling expenses for fiscal 1995 included a non-recurring $1.0 million
restructuring charge relating to consolidation of the European distribution
infrastructure.
General and administrative expenses for fiscal 1995 increased by $1.0
million, or 4.7%, to $22.5 million from $21.5 million for fiscal 1994. As a
percentage of sales, general and administrative expenses for fiscal 1995
decreased to 17.0% from 17.2% in fiscal 1994.
Income taxes. Despite operating losses, Barnes-Hind incurred income tax
expense of $2.7 million and $3.1 million in fiscal 1994 and fiscal 1995,
respectively. These tax provisions reflect Barnes-Hind as if it were a
separate taxable entity and represent international tax obligations resulting
from its transfer pricing system. The provisions of this transfer pricing
system were determined by the needs of the other members of the Pilkington
consolidated group. These tax obligations are not reflective of the ongoing
tax obligations of Barnes-Hind once acquired by Wesley Jessen.
LIQUIDITY AND CAPITAL RESOURCES
Prior to the Wesley Jessen Acquisition, the financing requirements of the
Company were funded by Schering-Plough through intercompany transfers. Such
transfers were significant because of the significant operating losses
incurred by the Predecessor and the magnitude of its liquidity requirement.
Since the Wesley Jessen Acquisition, the Company has financed its operations
primarily through funds provided from operations and through borrowings under
a revolving credit facility. Net cash provided by operating activities for the
period from June 29, 1995 through December 31, 1995 totaled approximately $4.0
million. For the nine months ended
41
<PAGE>
September 28, 1996, the Company generated approximately $22.4 million in cash
from operating activities, primarily as a result of increases in
profitability, decreases in accounts receivable and inventories and a decrease
in accounts payable. In particular, accounts receivable have decreased by $2.9
million and inventory has decreased by $9.9 million (excluding the inventory
step-up) from the time of the Wesley Jessen Acquisition through September 28,
1996 as a result of implementation of more stringent sales terms and improved
inventory management. Since the Wesley Jessen Acquisition and through
September 28, 1996, the Company has reduced the debt incurred in connection
therewith by $14.5 million.
During the period from June 29, 1995 to December 31, 1995 and for the nine
months ended September 28, 1996, the Company made capital expenditures of
approximately $0.9 million and $3.7 million, respectively. The majority of
these capital expenditures were for equipment maintenance and improvement.
Barnes-Hind incurred capital expenditures of $12.9 million and $13.6 million
in fiscal 1994 and fiscal 1995, respectively. Approximately $5.0 million of
this spending funded improvements in information technology. The remainder was
primarily spent on improving manufacturing efficiencies, including the partial
automation of the United Kingdom disposable lens manufacturing lines. The
Company has currently budgeted approximately $18.0 million of capital
expenditures for the remainder of 1996 and 1997 to (i) facilitate the
consolidation of the businesses; (ii) complete the installation of the
Company's software information system; and (iii) complete the automation of
the Company's Southampton manufacturing facility. The Company expects to fund
these capital expenditures primarily from cash generated from operating
activities and borrowings under its revolving credit facility.
In connection with the Wesley Jessen Acquisition, the Company initiated a
series of restructuring activities as part of its cost rationalization
program. As part of such acquisition, Schering-Plough agreed to incur the
significant one-time expenses associated with the elimination of approximately
430 positions. In addition, the Company has expended $3.7 million in cash in
the fifteen months since the acquisition to close facilities. Following the
Barnes-Hind Acquisition, the Company expects to incur $24.4 million of
restructuring costs related primarily to severance, retention bonuses and
lease expense on vacated facilities during the integration period. Management
expects that this restructuring will be substantially completed by September
1998.
As a result of both the Wesley Jessen Acquisition and the Barnes-Hind
Acquisition, the Company's borrowings under its Bank Credit Agreement
increased significantly as did its liquidity requirements. As of September 28,
1996 on a pro forma basis, the Company had approximately $43.4 million in
borrowing availability under the revolving credit facility portion of the Bank
Credit Agreement. The Bank Credit Agreement imposes certain restrictions on
the Company, including restrictions on its ability to incur indebtedness,
declare dividends or other distributions, make investments and capital
expenditures, grant liens, sell its assets and engage in certain other
activities. In addition, the indebtedness of the Company under the Bank Credit
Agreement is secured by substantially all of the assets of the Company,
including the Company's real and personal property, inventory, accounts
receivable, intellectual property and other tangible assets. See "Description
of Certain Indebtedness--Bank Credit Agreement."
Management believes that based on current levels of operations and
anticipated internal growth, cash flow from operations, together with other
available sources of funds including borrowings under the Bank Credit
Agreement and available cash on hand at September 28, 1996 of $2.7 million
(giving pro forma effect to the Barnes-Hind Acquisition), will be adequate for
the foreseeable future to make required payments of principal and interest on
the Company's indebtedness, to fund anticipated capital expenditures and
working capital requirements, including the aforementioned restructuring
costs, and to enable the Company and its subsidiaries to comply with the terms
of their debt agreements. However, actual capital requirements may change,
particularly as a result of any acquisitions which the Company may make. The
ability of the Company to meet its debt service obligations and reduce its
total debt will be dependent, however, upon the future performance of the
Company and its subsidiaries which, in turn, will be subject to general
economic conditions and to financial, business and other factors, including
factors beyond the Company's control. A portion of the consolidated debt of
the Company bears interest at floating rates; therefore, the Company's
financial condition is and will continue to be affected by changes in
prevailing interest rates. The Company expects to enter into an interest rate
protection agreement to limit the impact from a rise in interest rates.
42
<PAGE>
The estimated net proceeds of $45.2 million to be received by the Company
from the Offering will be used to (i) prepay certain of the Term Loans under
the Bank Credit Agreement; (ii) repay the Pilkington Note; and (iii) pay a fee
to Bain Capital in connection with the termination of the Advisory Agreement.
See "Use of Proceeds."
In connection with the Barnes-Hind Acquisition, the Company entered into a
voluntary consent order with the FTC, which provides, among other things, that
the Company must divest the Barnes-Hind's U.S. Natural Touch Product Line by
January 24, 1997. The Company does not believe the timing or magnitude of the
proceeds to be received in conjunction with the divestiture will be material
to its liquidity or cash flows during such period. See "Business--Required
Divestiture."
Based upon discussions with its principal lender under the Bank Credit
Agreement, the Company expects to refinance its existing indebtedness under
the Bank Credit Agreement upon consummation of the Offering. The Company
expects that the New Bank Credit Agreement will provide for borrowings of up
to $112.0 million and have a scheduled maturity in 2003. The Company
anticipates that the New Bank Credit Agreement will be secured by
substantially all of the assets of the Company and will generally contain less
restrictive covenants and better pricing terms than the Bank Credit Agreement.
To date, no definitive agreements have been executed and, as a result, no
assurance can be given that the New Bank Credit Agreement will be executed on
such terms or entered into at all.
More than 40% of the Company's net sales for the twelve months ended
September 28, 1996 on a pro forma basis were to international customers and
the Company expects that sales to international customers will continue to
represent a material portion of its net sales. Historically, fluctuations in
foreign currency exchange sales have not had a material affect on the
Company's results of operations and the Company does not expect such
fluctuations to be material in the foreseeable future. See "Risk Factors--
Risks Associated with International Sales."
SEASONALITY
Historically, the Company has experienced limited seasonality, with slightly
greater revenues in the quarters ended June and September and slightly lower
revenues in the quarters ended March and December. Barnes-Hind has experienced
the greatest revenues in the quarter ended March given that this quarter
coincided with its fiscal year end and its annual price increases. This
seasonality may not be representative of Barnes-Hind's seasonality following
its acquisition and ongoing modification to its pricing, promotion and
distribution strategies. The following table sets forth the unaudited
operating results of the Company for the last four fiscal quarters (prior to
the Barnes-Hind Acquisition), net of the impact of the inventory step-up.
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------
DECEMBER 31, MARCH 31, JUNE 29, SEPTEMBER 28,
1995 1996 1996 1996
------------ --------- -------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales.................. $27,257 $30,147 $32,250 $33,651
Gross profit............... 17,017 21,686 22,277 25,614
EBITDA (a)................. (309) 3,900 5,154 5,882
Income (loss) from
operations................ (113) 4,096 5,305 5,964
</TABLE>
- --------
(a) "EBITDA" is defined herein as income from operations plus depreciation and
amortization expense, non-recurring charges and other non-cash expense
items. The Company uses EBITDA in the management of its business and in
the evaluation of acquisition candidates. The Company understands that
while EBITDA is frequently used by security analysts in the evaluation of
companies, it is not necessarily comparable to other similarly titled
captions of other companies due to potential inconsistencies in the method
of calculation. EBITDA is not intended as an alternative to cash flow from
operating activities as a measure of liquidity, an alternative to net
income as an indicator of the Company's operating performance or any other
measure of performance in accordance with generally accepted accounting
principles.
43
<PAGE>
INFLATION
Management believes that inflation has not had a material impact on results
of operations for the Company or the Predecessor during the three years ended
December 31, 1995 and the nine months ended September 28, 1996.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
During the first quarter of 1996, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of," which requires
companies to review long-lived assets and certain identifiable intangibles for
impairment whenever events or changes in circumstances indicate that the
carrying amount of such assets may not be recoverable. The adoption of SFAS
No. 121 did not have a significant impact on the financial condition or
results of operations of the Company.
SFAS No. 123, "Accounting for Stock-Based Compensation" encourages, but does
not require, a fair market value based method of accounting for employee stock
options or similar equity instruments. The Company has elected to continue to
measure compensation cost under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" as was previously required, and to
comply with pro forma disclosure of net income and earnings per share as if
the fair market value based method of accounting had been applied.
44
<PAGE>
BUSINESS
Wesley Jessen is the leading worldwide developer, manufacturer and marketer
of specialty soft contact lenses. The Company's products include cosmetic
lenses, which change or enhance the wearer's eye color appearance; toric
lenses, which correct vision for people with astigmatism; and premium lenses,
which offer value-added features such as improved comfort for dry eyes and
protection from UV light. The Company offers both conventional contact lens
products, which can typically be used for up to 24 months, and a broad range
of disposable lenses, which are intended to be replaced at least every two
weeks. Founded in 1946 by pioneers in the contact lens industry, the Company
has a long-standing reputation for innovation and new product introductions.
The Company was acquired by Bain Capital and management in June 1995, and in
October 1996 the Company strengthened its product, technology and distribution
capabilities through the acquisition of Barnes-Hind. For the LTM period, the
Company's pro forma net revenues were $243.8 million and its pro forma
operating profit was $22.5 million.
The Company operates primarily in the specialty segment of the soft lens
market, where it has the leading share in each of the cosmetic and premium
lens segments and the second leading share in the toric lens segment. The
Company has the leading position in the specialty segment of the soft lens
market as a whole, which accounts for one-third of industry sales volume and
is projected to grow at approximately 15% per year through the year 2000. In
recent years, in both the clear and specialty lens segments, there has been a
pronounced shift in consumers' preferences toward disposable lenses and away
from conventional lenses, which has led to a significant increase in contact
lens expenditures per wearer. The Company estimates that currently more than
35% of U.S. soft lens wearers use disposable lenses, up from 21% in 1992. The
Company believes that its leading portfolio of disposable specialty lenses has
positioned it to benefit from the preference shift toward disposable lenses.
The Company also offers a complete line of conventional and disposable clear
lenses, which are positioned as companion products to the Company's cosmetic
lenses.
According to an independent research firm, more than 70% of all contact lens
in the United States offer the Company's products, which permits the Company
to rapidly launch new categories of products. Wesley Jessen develops
technology, manufacturing processes and products through a combination of its
in-house staff of more than 50 engineers and scientists and Company-sponsored
research by third-party experts. The Company markets and sells its products
(i) to consumers through the second largest advertising campaign in the
industry and (ii) to eyecare practitioners through its 180-person salesforce
and network of 60 independent distributors, which together sell the Company's
products in more than 75 countries.
The Company was founded by Drs. Newton K. Wesley and George Jessen, who went
on to pioneer the design, manufacture and fitting techniques of hard contact
lenses. From 1980 to 1995, the Company operated as a wholly owned subsidiary
of Schering-Plough. On June 28, 1995, Bain Capital and management acquired the
Company in the Wesley Jessen Acquisition. On October 2, 1996, the Company
acquired Barnes-Hind, the third largest manufacturer of speciality contact
lenses in the world, with a leading market position in premium and toric
lenses.
INDUSTRY OVERVIEW
Industry analysts estimate that over 50% of the world's population needs
some type of corrective eyewear. In the United States alone, there are nearly
153 million people who require some form of corrective eyewear. Most
individuals who wear contact lenses begin to do so in their early teens and
the majority of wearers are between the ages of 18 and 39. The Company
believes that the number of contact lens wearers will expand as technology
improves the convenience, comfort and fit of contact lenses, so that lenses
provide cost-effective and comfortable vision correction to a larger segment
of the population.
The contact lens industry is large and rapidly growing. In 1995,
manufacturers' sales of contact lenses worldwide totaled $1.8 billion,
representing a compound annual growth rate of 11% from $1.1 billion in 1990.
According to industry analysts, the U.S. market for contact lenses is expected
to grow approximately 10% per
45
<PAGE>
year through the year 2000. The Company believes that market growth outside
the United States will likely exceed domestic growth because of lower contact
lens penetration rates internationally. Since 1991, the number of contact lens
wearers in the United States has increased by 4.2% per year while revenue per
wearer has increased by 6.5% per year as conventional users have shifted to
more costly specialty and disposable lenses. While the market for hard contact
lenses had been relatively flat since 1991 with approximately 6 million U.S.
wearers, the number of people wearing soft contact lenses has grown at a
compound annual growth rate of 5.3% since that time.
The contact lens industry can be divided into the soft lens portion, which
represents approximately 80% of U.S. wearers, and the hard lens portion
(primarily rigid gas permeable ("RGP")), which represents approximately 20% of
U.S. wearers. Within the soft contact lens market, there are three principal
replacement regimes: conventional, disposable and planned replacement.
Conventional lenses are typically replaced after 12 to 24 months and require
periodic cleaning throughout the life of the lens. Disposable soft contact
lenses were introduced in the late 1980s based on the concept that changing
lenses on a more frequent basis helped to improve comfort, convenience and
health of the eye for many wearers. Disposable lenses are changed as often as
daily and up to every two weeks depending on the product. Planned replacement
lenses are designed to be changed as often as every month and up to every
three months and currently represent a small portion of the overall soft lens
market.
The two primary segments within the soft lens market are clear and
specialty. Clear lenses (lenses that do not provide value-added features that
specialty lenses offer) represent approximately 67% of the U.S. soft lens
market and include both conventional and disposable products. Growth in the
clear lens segment has been driven by growth in the population of 14- to 25-
year-olds (the prime age group for new lens wearers), the substitution of soft
for hard contact lenses and the continuous evolution in the contact lens
market toward more frequent replacement of contacts.
Specialty lenses represent the remaining 33% of the U.S. soft lens market
and generally command a premium price because they are designed for patients
who have a medical need for a specialized lens or who desire a lens with
additional features. Specialty lenses include cosmetic lenses (which change or
enhance the natural color of eyes while correcting vision), toric lenses (for
astigmatics) and premium lenses that offer protein deposit resistance,
improved visual acuity, enhanced comfort for dry eyes or UV protection.
Disposable lenses have recently been introduced into the specialty segment and
are expected to gain market share. The specialty lens segment of the soft
contact lens market has higher projected growth rates than the clear lens
segment. For the period from 1993 to 1996, the number of specialty lens
wearers has increased at a rate of 8% per year as compared to a 4% increase in
the number of clear lens wearers. The Company believes that continued rapid
growth in sales of specialty lenses will result from (i) the continued trend
toward disposables; (ii) increased awareness among consumers and eyecare
practitioners of the value-added features available with specialty lenses; and
(iii) new product innovations, such as disposable toric contact lenses, new
cosmetic designs, UV protection lenses and effective bifocal contact lenses.
An important characteristic of the contact lens industry is that an
individual's need for corrective eyewear is chronic. The need for vision
correction is often diagnosed at an early age and increases over time. Contact
lenses represent an alternative to eyeglasses, while offering improved
peripheral vision and additional features, such as eyecolor enhancement and UV
protection. Contact lens wearers will typically purchase lenses regularly for
several years.
Contact lenses require a prescription specifying a particular brand of
lenses. Such prescriptions are written by either ophthalmologists or
optometrists (referred to in the contact lens industry as "fitters"). An
ophthalmologist is a physician with a Doctor of Medicine ("MD") degree who
specializes in eyecare and an optometrist is a state-licensed eyecare
specialist who holds a Doctor of Optometry ("OD") degree. Fitters have the
ability to influence patients' choice of which contact lens brand they will
wear. Therefore, if a contact lens manufacturer successfully markets its
products to a fitter, that fitter will carry that manufacturer's brand of
contact lenses in inventory and offer it to patients. Once the brand is in the
fitter's inventory, the manufacturer
46
<PAGE>
will likely receive a stream of revenues from new patients for whom the brand
is prescribed as well as from patients who are refitted, change lens types or
need different prescriptions. Also, such manufacturer will be more likely to
successfully place new products in such fitter's inventory. Prescriptions for
contact lenses are filled by either ophthalmologists, optometrists, optical
chains, health maintenance organizations (HMOs), pharmacies or mail order
houses.
The contact lens industry is characterized by high brand loyalty. The
Company believes that wearers resist switching brands once a particular brand
is prescribed and fitted successfully. By staying with an existing brand, a
customer can replace his or her current lens without an eye examination. Even
for an adjusted prescription, customers typically acclimate to a particular
lens design and may experience discomfort if refitted with a new brand.
Typically, only when a customer is experiencing difficulty with a lens or the
customer wants to switch from conventional to disposable lenses or from clear
to specialty lenses will a fitter refit with a different brand of lens. The
Company believes, based on historical patterns in the contact lens industry
that once a product category has matured, brand loyalty causes competitive
market share to remain relatively constant. However, overall market share may
shift because of different growth rates of each category or the creation of
new categories.
No new significant competitors have entered the soft contact lens industry
in the last ten years. To compete successfully in the industry entails
substantial risks and requires significant investment of time and resources.
In particular, the Company believes a new entrant must successfully (i)
develop new innovative product offerings; (ii) master the sophisticated
processes required to manufacture contact lenses; (iii) invest the significant
capital required to develop manufacturing capacity; (iv) overcome existing
patent protections covering the design, materials and manufacturing processes
of contact lenses; and (v) obtain FDA product clearances, each of which may
take several years.
COMPETITIVE STRENGTHS
The Company believes it has achieved its leading worldwide market position
in specialty contact lenses because of the following competitive strengths:
HIGH-QUALITY BRANDED PRODUCTS. Wesley Jessen produces a broad range of
high-quality contact lenses that meet customers' demand for improved
cosmetic, comfort, ease-of-care and vision-correction features and are sold
under brand names recognized by ophthalmologists and optometrists
worldwide. The Company's cosmetic lens products are marketed under the
DuraSoft, Elegance and FreshLook brand names, its toric lenses under the
Optifit, Hydrocurve and CSI brand names, and its premium lenses under the
Gentle Touch, Precision UV, Aquaflex, and CSI Clarity brand names. Both
eyecare practitioners and wearers tend to show significant brand loyalty
once a particular brand of lenses is properly fitted and prescribed. As a
result, the Company's large installed base of contact lens fitters and
current wearers affords the Company a recurring revenue stream.
SUCCESSFUL DEVELOPMENT AND INTRODUCTION OF NEW PRODUCTS. The Company has
a strong track record of developing new specialty contact lens products,
with the five new product lines introduced since 1994 accounting for 25% of
the Company's pro forma net revenues in the LTM period. The Company
introduced the first disposable opaque lens and the first disposable lens
that offers UV protection in 1994. The Company believes that being the
first to introduce a new specialized lens is a competitive advantage over
subsequent entrants to that product category because of the significant
brand loyalty in the contact lens industry.
BROAD PATENT PORTFOLIO. Wesley Jessen believes that its intellectual
property, including more than 70 U.S. patents in product design, materials
and manufacturing processes, makes imitation of the Company's products
difficult, support the Company's strong gross margins and provide the
Company with a competitive advantage. The Company's most important patents
cover the design of its toric lenses; the material, process and design of
clear-pupil cosmetic lenses; and the technology necessary to produce
certain advanced polymer lenses. The Company believes that its patent
portfolio and manufacturing expertise allow it to produce and sell
specialty lens products that are not otherwise available on the market.
47
<PAGE>
ESTABLISHED SALES AND DISTRIBUTION NETWORK. The Company believes its
salesforce and distributor network constitute the largest and most
sophisticated sales organization in the specialty contact lens market. The
Company's salesforce has focused on developing strong relationships with
eyecare practitioners throughout North America, Europe, Asia and Latin
America. Through its sales efforts, the Company seeks to educate and inform
eyecare practitioners as to (i) the breadth of its specialized product
line; (ii) the extent to which they can build their practice through the
use of the Company's products; and (iii) their ability to generate more
revenue per patient by prescribing the Company's value-added lenses instead
of conventional or disposable clear lenses.
STRONG INTERNATIONAL MARKET PRESENCE. On a pro forma basis, Wesley Jessen
derives more than 40% of its net sales from sales outside the United
States, and the Company's specialty contact lens products have leading
market shares in Europe, Japan and Latin America. The Company has over 85
international sales representatives and 60 distributors covering more than
75 countries. The Company believes that such international markets offer
attractive opportunities for increased sales as a result of lower contact
lens penetration rates as compared to the United States.
LOW-COST, PROPRIETARY MANUFACTURING CAPABILITIES. The Company produces
substantially all of its contact lens products in four state-of-the-art
manufacturing facilities, which apply proprietary technology, allow the
Company to be a flexible, low-cost manufacturer of specialty lenses and
have excess capacity sufficient to meet the Company's rapidly growing needs
for several years. The Company believes that it enjoys a competitive
advantage over other contact lens manufacturers as a result of its ability
to produce cost-effective specialized contact lenses using short production
runs. Consequently, the Company can offer approximately 180,000 stock-
keeping units (SKUs). Furthermore, the Company's manufacturing operations
in Puerto Rico provide it with significant tax benefits.
EXPERIENCED MANAGEMENT WITH A PROVEN RECORD OF IMPROVING PROFITABILITY.
The Company's senior management, who on average have more than 10 years of
experience in the contact lens industry, have increased the Company's
operating margin 42 percentage points since the Company was acquired by
Bain Capital and management in mid-1995. This operating improvement was
accomplished through the successful implementation of cost reduction
programs, rationalization of manufacturing processes, refocusing of
research and development programs, and execution of targeted marketing
strategies. Furthermore, certain of the Company's key managers, including
the Company's President and Chief Financial Officer, have significant
experience with the operations of Barnes-Hind, having managed it profitably
prior to its sale to Pilkington in 1987.
GROWTH STRATEGY
The Company's principal objective is to expand its contact lens business in
the faster-growing specialty segments of the market in order to achieve
continued growth in revenues and operating profit. The Company's continuing
business strategy is to:
CAPITALIZE ON FAVORABLE INDUSTRY TRENDS. According to industry analysts,
the number of soft contact lens wearers in the United States has increased
from 19 million in 1990 to over 23 million in 1995. The Company estimates
that the number of soft contact lens wearers will increase by approximately
5% annually through the year 2000 as soft contact lenses continue to gain
popularity and the number of 14- to 25-year-olds (the prime age group for
new lens wearers) increases. In addition, there has been an ongoing shift
among wearers from conventional lenses to more profitable disposable lenses
as well as from clear lenses to specialty lenses, which favors the
Company's product line, including its recently introduced FreshLook
disposable cosmetic lenses and Precision UV disposable premium lenses.
INCREASE THE COMPANY'S MARKET SHARE. The Company employs a two-pronged
marketing strategy to increase Wesley Jessen's market share, using both
direct consumer advertising and targeted marketing to eyecare
practitioners. The Company has spent approximately $10.0 million on a
national consumer advertising campaign featuring Christy Turlington to
raise brand awareness and demand among consumers. In addition, the Company
uses its highly trained salesforce to market its specialty lens products to
eyecare
48
<PAGE>
practitioners. The salesforce seeks to train new ODs and MDs to fit the
Company's lenses and to educate eyecare practitioners as to the value-added
features and revenue potential of the Company's products.
DEVELOP AND SUCCESSFULLY LAUNCH NEW PRODUCTS. The Company's research and
development program is geared toward developing new products with
commercial appeal, particularly category-creating products (such as the
Company's new line of disposable lenses offering UV protection), as
industry dynamics have historically provided considerable advantages to a
firm that successfully introduces the first product in a category. In the
last twelve months, the Company has introduced four new products or line
extensions, including disposable color-enhancing lenses for light eyes,
custom toric lenses, custom cosmetic lenses and cosmetic lenses for
patients with farsightedness. The Company currently has several new
products and product line extensions in various stages of development. See
"--Research and Development."
INCREASE THE INTERNATIONAL PENETRATION OF ITS PRODUCTS. The Company
believes that several international markets, particularly Europe, Japan and
Brazil, offer significant opportunities for growth. In Europe, the Company
intends to expand its direct sales organization, and in Japan, the Company
will continue to develop strategic partnerships with leading local
manufacturers and distributors.
REALIZE SYNERGIES THROUGH THE INTEGRATION OF BARNES-HIND. The Company's
acquisition of Barnes-Hind has created a number of significant
opportunities to improve the Company's results of operations. While Wesley
Jessen and Barnes-Hind had roughly equivalent net sales in the twelve
months ended September 28, 1996, Wesley Jessen employed approximately 1,000
persons as of that date whereas Barnes-Hind employed approximately 1,600
persons. Consequently, the Company believes that substantial cost savings
are available through personnel reductions. In addition, the Company is in
the process of moving operations currently performed at Barnes-Hind's
Sunnyvale, California facility to the Company's facility in Des Plaines,
Illinois. Management plans to implement other identified cost reductions
and to seek further cost savings opportunities, including personnel
reductions and facilities consolidation. Finally, the Company believes
there are significant cross-selling opportunities available to sell Barnes-
Hind products to current Wesley Jessen customers and vice versa.
BENEFIT FROM THE COMPANY'S SIGNIFICANT OPERATING LEVERAGE. The Company
plans to further improve its results of operations by utilizing excess
manufacturing capacity, investing in new low-cost manufacturing
technologies and achieving economies of scale in development, manufacturing
and distribution. The Company enjoys significant operating leverage (i.e.,
a disproportionately greater impact on earnings resulting from a change in
revenues) due to significant fixed-cost components of the Company's
manufacturing operations, research and development program and marketing
efforts. Because the Company's disposable lens manufacturing facilities are
currently operating at approximately 60% of their capacity, increased
production volumes through the addition of new lens wearers to the
Company's customer base generally should not require the incurrence of
significant additional costs.
The Company regularly considers the expansion of its contact lens business
through acquisitions, joint ventures and other strategic alliances. Through
such arrangements, the Company will seek to broaden its product lines within
the contact lens industry and its geographic coverage and to acquire
complementary product lines.
49
<PAGE>
PRODUCTS
The following table sets forth the approximate composition, by product line,
of the Company's net sales for the twelve months ended September 28, 1996 on a
pro forma basis.
NET SALES BY PRODUCT LINE
(dollars in thousands)
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED SEPTEMBER 28,
1996
----------------------
PRODUCT LINE AMOUNT PERCENT
------------ ----------- ----------
<S> <C> <C>
Specialty Lenses:
Cosmetic.......................................... $ 86,120 35%
Toric............................................. 40,542 17
Premium........................................... 60,316 25
----------- -------
Total Specialty Lenses.......................... 186,978 77
Clear Lenses........................................ 48,992 20
Hard/Other Lenses................................... 7,855 3
----------- -------
Total Lenses.................................... $ 243,825 100%
=========== =======
</TABLE>
SPECIALTY LENSES. The Company's products primarily consist of specialty soft
contact lenses, including cosmetic, toric and premium lenses. With the
broadest product offering in the industry, the Company captured over 36% of
the U.S. specialty lens market in 1995. For the twelve months ended September
28, 1996, the Company's specialty lenses generated approximately $187.0
million in net sales worldwide on a pro forma basis. The Company's specialty
soft contact lens products include the following:
Cosmetic Lenses. Cosmetic lenses enhance or change the color of a wearer's
eyes. The Company's opaque color lenses, which change the color of dark eyes
(e.g., brown to green), utilize a patented dot matrix technology that the
Company believes allows for superior cosmetic appeal. As a result, the
Company's opaque cosmetic lens products have become the standard in the
market. In early 1996, the Company introduced its new enhancer color lenses,
which enhance the natural color of light eyes and which the Company believes
will become the market standard due to its patented color printing process
that allows the pupil-covering zone of the lens to remain clear. The Company
manufactures a complete line of cosmetic lenses, including: (i) the
conventional DuraSoft 2 daily wear lens, which is removed and cleaned daily
and typically is replaced after 12 to 24 months; (ii) the conventional
DuraSoft 3 extended wear lens, which can be worn overnight for up to seven
days and is also typically replaced after 12 to 24 months; and (iii) the
disposable FreshLook contact lens, which is typically replaced every two
weeks. With the broadest product offering in the cosmetic lens segment, the
Company captured over 38% of the U.S. cosmetic lens market in 1995. For the
twelve months ended September 28, 1996, the Company's cosmetic lenses
generated over $86.1 million in net sales worldwide on a pro forma basis.
Toric Lenses. Toric lenses are designed to correct vision for people with
astigmatism, which is characterized by an irregularly shaped cornea. Prior to
the introduction of the Company's toric lenses and other competing products in
the late 1980s, this condition was not effectively correctable through the use
of soft contact lenses. Approximately 30% of the U.S. population requiring
vision correction are diagnosed with astigmatism, of which only 5% currently
wear soft contact lenses. The Company's Optifit, Hydrocurve and CSI toric
lenses captured over 20% of the U.S. toric lens market in 1995. For the twelve
months ended September 28, 1996, the Company's toric lenses generated over
$40.5 million in net sales worldwide on a pro forma basis.
Premium Lenses. Premium lenses offer the wearer value-added features such as
protein deposit resistance, improved visual acuity, enhanced comfort for dry
eyes and UV protection. The Company manufactures the premium CSI Clarity lens,
which has long been regarded by eyecare practitioners and optical retailers as
having superior visual acuity and deposit resistance. The Company also
recently introduced Precision UV, the first disposable lens available with UV
protection, which is quickly gaining share from many clear disposable lenses.
50
<PAGE>
The Company's market research suggests that some 90% of contact lens wearers
are interested in lenses offering UV protection. The Company's Gentle Touch
product, which is typically replaced every three months, was the first lens
designed specifically for and approved by the FDA for use without intensive
cleaning or special handling required of conventional lenses and offers the
unique combination of enhanced comfort for dry eyes, deposit resistance and low
cost relative to disposable alternatives. The Company captured 92% of the U.S.
premium lens segment in 1995. For the twelve months ended September 28, 1996,
the Company's premium lenses generated over $60.3 million in net sales
worldwide on a pro forma basis.
The following table sets forth certain of the brand names under which the
Company's specialty contact lenses are sold:
<TABLE>
<CAPTION>
TYPE OF LENS SPECIALTY CONTACT LENS
- ------------------- -----------------------------------------------------------
COSMETIC TORIC PREMIUM
------------------- ------------------- -------------------
<S> <C> <C> <C>
Conventional: DuraSoft CSI Aquaflex
Elegance (a) Optifit CSI Clarity
Natural Touch (a) Hydrocurve Hydrocurve
Disposable/ Planned FreshLook Colors Gentle Touch
Replacement: FreshLook Enhancers FreshLook (b) Precision UV
</TABLE>
- --------
(a) Used only in international markets.
(b) Currently under development.
The Company has successfully entered into the private label market with the
offering of a private label UV protection lens. The Company sells its specialty
contact lenses under private label primarily in Japan, the United Kingdom and
France. The Company believes that private label offer significant growth
opportunities due to the Company's unique product offerings and low-cost
manufacturing capabilities.
CLEAR LENSES. Wesley Jessen manufactures a complete line of conventional and
disposable clear lenses that are positioned as companion lenses to the DuraSoft
and FreshLook cosmetic product lines. The Company believes that eyecare
practitioners can increase their revenues and profitability, as well as the
value provided to lens wearers, by fitting patients with either a DuraSoft or
FreshLook clear or cosmetic lens and then selling the patient a companion
cosmetic or clear lens with no additional fitting expense. In fact,
approximately 70% of color lens wearers also own clear lenses. Clear lenses
accounted for approximately $49.0 million of the Company's worldwide net sales
for the twelve months ended September 28, 1996 on a pro forma basis.
HARD/OTHER LENSES. The Company also sells Polycon RGP lenses to a large base
of eyecare practitioners who fit RGP lenses. In addition, the Company
manufactures prosthetic lenses, which are custom cosmetic products that return
damaged or disfigured eyes to normal appearance. The Company donates all
profits generated from its prosthetic product line to professional associations
to generate goodwill with eyecare practitioners.
RESEARCH AND DEVELOPMENT
The Company's research and development efforts are focused on product
development and process technology to support its specialty lens business. The
Company maintains a core research and development staff, which oversees the
Company's research projects. Such projects are generally conducted by
independent laboratories and universities at the Company's direction and
expense. The Company's research and development expenses totaled $9.5 million,
or 3.9% of net revenues, for the twelve months ended September 28, 1996 on a
pro forma basis.
In the last twelve months, the Company has introduced four new products or
line extensions, including disposable cosmetic lenses for light eyes, custom
toric and color lenses and expanded cosmetic powers and colors. The Company
also developed a superior patented UV protection specialty lens for which it
received FDA approval in January 1996. The UV protection lens allows the
Company to further penetrate the emerging health-conscious market and permits
cross-promotion with the Company's current specialty lens wearers.
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The Company has a history of innovation and new product introductions. The
Company is currently investing in the development of, among other specialty
products, a disposable toric lens, a next generation cosmetic lens, and a new
disposable UV-protection lens. The Company is also investing in the
development of bifocal contact lenses (for persons, typically over age 45, who
experience both farsightedness and nearsightedness) and has received several
patents related to its bifocal lens technology. In the contact lens industry,
no products currently being marketed in the bifocal category have achieved
widespread commercial acceptance, and as a result, the Company believes that a
significant market opportunity is available to the Company if it can harness
its technology to successfully launch bifocal contact lenses. Finally, the
Company has targeted additional research and development projects to cut
manufacturing costs in the cosmetic, premium and toric product lines.
MANUFACTURING
Substantially all of the Company's products are manufactured in the
Company's four principal production facilities, which are located in Cidra,
Puerto Rico; Des Plaines, Illinois; San Diego, California; and Southampton,
United Kingdom. See "--Facilities." The Company utilizes state-of-the-art
manufacturing equipment and process technology to control the quality of its
products and to minimize costs. The Company engages in manufacturing processes
that are designed to handle short production runs. As a result, the Company
believes that it enjoys a competitive advantage over other contact lens
manufacturers because it can be more versatile and cost-competitive in market
segments that require special features and products manufactured to meet more
stringent specifications. The Company's disposable lens manufacturing
facilities are currently operating at approximately 60% of their maximum
capacity.
The Company produces its hard and soft contact lens products primarily
through manufacturing processes known as lathing and cast molding. Lathing is
a machining process through which a piece of rigid lens material is shaped
into a concave form with refractive characteristics by using a high-precision
lathe. Following this machining, soft lenses are hydrated in a saline solution
and sterilized, while RGP lenses are produced using polymers that don't absorb
moisture and do not require sterilization. Lathing technology is particularly
well suited for use in short production runs and is used by the Company to
produce soft lenses at its Cidra, Puerto Rico; San Diego, California; and
Southampton, United Kingdom facilities and to produce RGP lenses at its
Atlanta, Georgia and Farnham, United Kingdom facilities.
The Company also uses cast molded technology to produce its disposable
contact lenses. In this process, a disposable plastic mold is made through the
use of an automated injection molding press containing highly-engineered
optical tooling. A liquid monomer is then dispensed into the mold which
polymerizes to form the lens. In dry cast molding, the lenses are formed in a
rigid state and are hydrated to their final characteristics after being
removed from the mold. In wet cast molding, the lenses are formed fully
hydrated. The Company uses dry cast molded technology at its Southampton,
United Kingdom and Des Plaines, Illinois facilities.
SALES AND MARKETING
The Company has implemented a two-pronged sales and marketing strategy that
reflects the Company's belief that both consumers and eyecare practitioners
are important to the success of the Company's products. To generate consumer
awareness and increase demand for its products, the Company has spent
approximately $10.0 million on a national advertising campaign featuring
Christy Turlington. The Company also has developed cross-promotion programs
designed to increase sales of its cosmetic lenses by offering a set of the
Company's most popular cosmetic lenses with each purchase of a set of six
pairs of clear disposable lenses.
Due to the fitter's influence over a patient's choice of contact lens brand,
the Company believes that developing and maintaining strong relationships with
eyecare practitioners is the most critical aspect of its sales and marketing
strategy. The Company has a salesforce of 180 persons who market the Company's
products to eyecare practitioners. The Company's salesforce seeks to train new
ODs and MDs to fit the Company's lenses and to inform such persons of the
revenue potential and value-added features of the Company's products. In
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marketing to eyecare practitioners, the Company stresses the quality and
features offered by its products, the breadth of its product line, and the
ability of such practitioners to generate more revenue per patient by offering
the Company's value-added products. The Company also advertises its products to
eyecare practitioners through promotional materials, trade publications and
conventions.
The Company currently sells through a direct salesforce in North America,
Europe and Australia. Countries in Europe, Asia and Latin America not directly
served by the Company are serviced by a broad network of distributors. The
Barnes-Hind Acquisition strengthened the Company's global distribution
infrastructure by contributing direct salesforces in Germany, Spain, Belgium,
Netherlands, Luxembourg and Australia, in addition to strengthening existing
salesforces in the United States, France, Italy, Canada and the United Kingdom.
The following table sets forth the Company's net sales by geographic region
for the twelve months ended September 28, 1996 on a pro forma basis:
NET SALES BY GEOGRAPHIC REGION
(dollars in thousands)
<TABLE>
<CAPTION>
WESLEY JESSEN BARNES-HIND TOTAL
---------------- ---------------- ----------------
REGION AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
- ------ -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
United States ............... $ 78,691 63.8% $ 54,235 45.0% $132,926 54.5%
Europe....................... 17,410 14.1 40,033 33.2 57,443 23.6
Asia Pacific................. 9,137 7.4 18,295 15.2 27,432 11.2
Other........................ 18,067 14.7 7,957 6.6 26,024 10.7
-------- ----- -------- ----- -------- -----
Total ..................... $123,305 100.0% $120,520 100.0% $243,825 100.0%
======== ===== ======== ===== ======== =====
</TABLE>
CUSTOMERS
The Company currently sells its products through a variety of channels
including fitters (MDs, ODs and optical retailers) and distributors who sell to
fitters and lens-replacement suppliers. The Company sells to a highly
fragmented account base with no one customer accounting for more than 5% of its
revenues for the twelve months ended September 28, 1996 on a pro forma basis.
Furthermore, the Company's top 10 customers accounted for less than 25% of its
revenues for the twelve months ended September 28, 1996 on a pro forma basis.
In the United States, the Company sells to three customer segments: private
practitioners, chain accounts and distributors. There are approximately 17,700
private practitioners (MDs and ODs not affiliated with a retail chain) who fit
the Company's products. In addition, the Company has distribution in over 5,000
retail chain locations, such as Cole National Corporation, LensCrafters,
National Vision Association and Wal-Mart Stores, Inc., that advertise, promote
and fill prescriptions for the Company's products. Distributors supply but do
not fit the Company's lenses. The chart below illustrates the mix of
distribution channels used by Wesley Jessen and Barnes-Hind on a combined basis
in the United States in 1995:
NET SALES BY DISTRIBUTION CHANNEL
(as a percentage of net sales)
<TABLE>
<CAPTION>
PERCENT OF 1995
DISTRIBUTION CHANNEL U.S. SALES
-------------------- ---------------
<S> <C>
Private Practitioners .................................... 45%
Chain Accounts............................................ 23
Distributors.............................................. 32
---
Total................................................. 100%
===
</TABLE>
In Europe, key corporate accounts like Boots and D&A in the United Kingdom
and Optic 2000 in France have selected the Company's lenses as their private
label as well as offering its branded products. In Japan, the
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<PAGE>
world's second largest contact lens market, the Company has formed strategic
relationships with five of the leading hard and soft contact lens
manufacturers. The Company has doubled its Japanese sales in the last year
using this strategy.
The Barnes-Hind Acquisition provided Wesley Jessen with access to a new set
of accounts and the opportunity to cross-sell existing product lines between
Wesley Jessen's and Barnes-Hind's extensive customer bases.
DISTRIBUTION
The Company performs most warehousing, inventory management, order taking
and order fulfillment functions in-house. The Company's fulfillment system
provides the flexibility to receive, fill and ship orders as small as a single
lens and as large as a full truckload. Approximately 8,500 orders are received
daily, primarily by telephone and facsimile in seven customer service centers
in North America, Europe, Japan and Australia.
In the U.S. market, approximately 65% of the Company's lenses are shipped
primarily by common carriers directly to eyecare practitioners from
distribution centers in San Diego, California and Chicago, Illinois. The
remaining 35% are shipped to distributors, who resell lenses to practitioners
and mail-order houses. In several key markets outside the U.S., the Company
sells and distributes lenses directly to eyecare practitioners. In other
international markets, the Company serves customers through its network of 60
independent distributors.
COMPETITION
The contact lens market is highly competitive. The Company faces competition
from other companies within each segment of the contact lens market in which
it operates. In the specialty segment of the market, the Company principally
competes with divisions of large medical and pharmaceutical companies,
including Ciba Vision (a division of Ciba-Geigy Corporation) and Bausch &
Lomb, Inc. as well as with smaller companies. To the extent the Company
operates in the clear lens segment, it faces competition primarily from
Vistakon (a division of Johnson & Johnson) and other large contact lens
manufacturers such as Ciba Vision and Bausch & Lomb, Inc.. Certain of the
Company's competitors in each segment have lower costs of operations, products
with enhanced features, substantially greater resources to invest in product
development and customer support, greater vertical integration and greater
access to financial and other resources than the Company. While the Company is
the leading manufacturer and distributor of specialty contact lenses, the
Company ranks fourth in the contact lens market overall in terms of net
revenues. To a lesser extent, the Company also competes with manufacturers of
eyeglasses and providers of other methods of vision correction, including
refractive surgical procedures.
Within the contact lens market, the Company believes that the principal
competitive factors in the specialty segment include product innovation, brand
awareness, product quality and price. Due to the manner in which contact
lenses are distributed (i.e., through prescription), the Company also competes
on the basis of its relationships and reputation with eyecare practitioners.
SUPPLIERS
The Company has a broad base of suppliers. The Company has qualified
multiple vendors to supply substantially all of the materials used by the
Company in its manufacturing processes and actively seeks to qualify new
vendors to insure adequate access to such materials. The primary raw materials
used by the Company in the production of contact lenses are specialty
chemicals. For the last twelve months ended September 28, 1996 on a pro forma
basis, no supplier accounted for more than 5.0% of the Company's costs of
goods sold.
The Company utilizes a number of advanced polymers and other sophisticated
materials in the production of its contact lenses. Due to the highly technical
and specialized nature of certain of its production materials, the Company
relies from time to time on a single supplier to provide it with sufficient
quantities of certain materials used in the production of one or more of its
product lines. To minimize its reliance on a particular vendor, the Company
continually seeks to identify multiple vendors qualified to supply its
production materials and currently has only two materials that are significant
to its operations that are available from a single source. Although the
Company believes that it is not dependent on any single supplier, the
inability of the Company to obtain sufficient quantities of certain production
inputs could have a material adverse effect on the Company's financial
condition or results of operations.
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FACILITIES
The Company's principal manufacturing facilities are located in Cidra,
Puerto Rico; Des Plaines, Illinois; San Diego, California; and Southampton,
United Kingdom. Following the Wesley Jessen Acquisition, the Company's
headquarters were relocated from Chicago to its facility in Des Plaines,
Illinois (a suburb of Chicago). By December 1997, the Company will have
significantly consolidated its distribution operations as part of management's
cost savings strategy. In Europe, Barnes-Hind has consolidated warehouses and
customer service centers into one distribution center in the United Kingdom
and two customer service centers in the United Kingdom and France. In
addition, the former corporate headquarters of Barnes-Hind, which was located
in Sunnyvale, California, is scheduled to be closed in March 1997, with an
estimated annual operating savings of $3.8 million.
The Company believes that substantially all of its property and production
equipment is in good condition and that it has sufficient capability to meet
its current and projected manufacturing and distribution needs for the
foreseeable future. All of the Company's owned properties are subject to a
mortgage as collateral under the Bank Credit Agreement. The following table
describes the principal properties of the Company as of September 28, 1996
(giving effect to the Barnes-Hind Acquisition):
<TABLE>
<CAPTION>
SQUARE
LOCATION FUNCTION FOOTAGE OWNED/LEASED
-------- -------- ------- ------------
<S> <C> <C> <C>
Des Plaines, Illinois Corporate Headquarters/Disposable Manufacturing 290,000 Owned
Bradley Place, Illinois Distribution Center 48,000 Leased
San Diego, California Conventional Manufacturing 19,000 Owned
San Diego, California Conventional Manufacturing/Distribution 117,700 Leased
Sunnyvale, California Former Headquarters of Barnes-Hind (1) 74,000 Leased
Atlanta, Georgia RGP Manufacturing 7,200 Leased
Cidra, Puerto Rico Conventional Lens Manufacturing 65,000 Owned
Southampton, United Kingdom Disposable Manufacturing/Customer Service/R&D 66,200 Leased
Southampton, United Kingdom Conventional Manufacturing 12,250 Leased
Farnham, United Kingdom RGP Manufacturing 5,000 Leased
Chandlers Ford, United Kingdom Conventional Manufacturing 24,500 Leased
Mississauga, Ontario Sales Office/Distribution 7,000 Leased
Bagnolet, France Sales Office/Distribution 6,997 Leased
Herts, United Kingdom Sales Office/Distribution * Leased
Rome, Italy Sales Office/Distribution 7,750 Leased
Brooklyn, Australia Sales Office/Distribution 5,900 Leased
Tokyo, Japan Sales Office/Distribution 5,000 Leased
Madrid, Spain Sales Office * Leased
Reeuwijk, Holland Sales Office * Leased
Kortryk, Belgium Sales Office * Leased
Milan, Italy Sales Office * Leased
Paris, France Sales Office * Leased
Munich, Germany Sales Office * Leased
</TABLE>
- --------
*Less than 5,000 square feet.
(1)This facility is scheduled to be closed by the second quarter of 1997.
CIDRA, PUERTO RICO. This 65,000 square foot facility was completed in 1991
and produces the Company's Durasoft and Optifit conventional clear and
specialty lenses.
DES PLAINES, ILLINOIS. This 290,000 square foot facility currently produces
all of the Company's FreshLook disposable lenses, and also houses its
corporate headquarters, research and development activities and other
administrative services. The Des Plaines facility was substantially completed
by 1994.
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SAN DIEGO, CALIFORNIA. This 136,700 square foot facility produces the
Company's CSI, Hydrocurve and Gentle Touch premium and toric lenses.
Additionally, the facility is used for U.S. distribution, customer service and
management information systems.
SOUTHAMPTON, UNITED KINGDOM. This 66,200 square foot facility was
substantially completed in 1996 and supports production of the Company's
Precision UV lenses.
PATENTS AND TRADEMARKS
The Company's business and competitive position benefit from the validity
and enforcement of its intellectual property protection. The Company owns a
variety of patents, trademarks, trade secrets, know-how and other intellectual
property which it believes to be important to its current and future success.
The market for the Company's products rewards product innovation, which tends
to amplify the importance of intellectual property protection.
The Company holds numerous U.S. and foreign patents and patent applications
which relate to aspects of the technology used in the Company's products. The
Company's policy is to file patent applications to protect technology,
inventions and improvements that are considered important to the development
of its business. There can be no assurance that patent applications filed by
the Company will result in the issuance of patents or that any of the
Company's intellectual property will continue to provide competitive
advantages for the Company's products or will not be challenged, circumvented
by others or invalidated.
The Company holds more than 70 U.S. patents, many of which have been
extended into key foreign countries. The most important part of the Company's
patent portfolio relates to the design and production techniques of the
Company's cosmetic lenses. These patents begin to expire in the year 2004. The
Company's patents include patterns for changing the color of and enhancing the
iris, as well as methods for performing the printing operation and promoting
the adhesion of the printed ink to the lens. This group of patents covers both
the technology used by the Company in the production of its cosmetic lenses,
as well as many viable alternatives which could be used to replicate such
production techniques. Another important group of patents covers the Company's
newest lens molding technology, which accommodates a high degree of automation
with correspondingly lower manufacturing cost. The features covered are
casting cup design, numerous process techniques and blister package design.
The Company has filed but not yet received a patent for its automatic lens
inspection system. The Company also holds patents covering a UV-absorbing lens
and a proprietary compound for making such lenses, the design and manufacture
of toric lenses, lens materials and bifocal lens technology.
The Company's policy is to aggressively prosecute and defend its patents and
other proprietary technology. The Company is currently seeking to enforce its
intellectual property rights to cosmetic lenses in a lawsuit pending in Italy.
The prosecution and defense of intellectual property protections, like any
lawsuit, is inherently uncertain and carries no guarantee of success. The
protection of intellectual property in certain foreign countries is
particularly uncertain. There can be no assurance that the prosecution and
defense of its intellectual property will be successful or that the Company
will be able to secure adequate intellectual property protections in the
future.
The Company's trademarks include the following well recognized brand names:
Aquaflex(R), CSI(R), DuraSoft(R), Elegance, FreshLook(R), Gentle Touch,
Hydrocurve, Optifit(R), Polycon(R), Precision UV and SoftPerm(R). The
Company's policy is to register trademarks in countries where registration is
available and deemed necessary or appropriate. Trademark applications are
pending for various marks in the United States and other countries. There are
gaps in registrations, and some marks may not be available for use in various
countries.
In addition to patents and trademarks, the Company owns certain trade
secrets, copyrights, know-how and other intellectual property. The Company
seeks to protect these assets, in part, by entering into confidentiality
agreements with its business partners, consultants and vendors and appropriate
non-competition agreements with its officers and employees. There can be no
assurance that these agreements will not be breached, that the Company will
have adequate remedies for any such breach or that the Company's trade secrets
and other intellectual property will not otherwise become known or be
independently developed by others and thereby become unprotected.
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<PAGE>
GOVERNMENT REGULATION
The Company's products are generally regulated in the United States and in
foreign countries as "medical devices." As a manufacturer of medical devices,
the Company is subject to regulation in the United States by the FDA and
corresponding state and foreign regulatory agencies where the Company sells
its products. These regulations generally govern the introduction of new
medical devices, the maintenance of certain records, the tracking of devices
and other matters. The regulatory environment in which the Company operates
can be expensive, time-consuming and uncertain.
FDA Regulation. Pursuant to the FDC Act, and the regulations promulgated
thereunder, the FDA regulates the preclinical and clinical testing,
manufacture, labeling, distribution, and promotion of medical devices.
Noncompliance with applicable requirements can result in, among other things,
fines, injunctions, civil penalties, recall or seizure of products, total or
partial suspension of production, failure of the government to grant premarket
clearance or premarket approval for devices, withdrawal of marketing
clearances or approvals and criminal prosecution. The FDA also has the
authority to request the recall, repair, replacement or refund of the cost of
any device manufactured or distributed by the Company.
Under the FDC Act, clearance or approval by the FDA is required prior to the
commercialization of a medical device. The FDA classifies medical devices as
Class I, Class II or Class III, depending on the nature of the medical device
and the existence in the market of any similar devices. The nature of the
clearance or approval procedures is dependent on the classification of the
medical device in question. Class I medical devices are subject to general
controls, including labeling, premarket notification and adherence to the
FDA's good manufacturing practice regulations ("GMP Regulations"). Class II
medical devices are subject to general and special controls, including
performance standards, post-market surveillance, patient registries and FDA
guidelines. Class III medical devices are those which must receive premarket
approval by FDA to ensure their safety and effectiveness, are generally life-
sustaining, life-supporting devices or implantable devices or new devices
which have been found not to be substantially equivalent to currently marketed
medical devices. The Company's products are generally regulated as Class II
medical devices, with some products (extended wear lenses) regulated as Class
III medical devices.
Before a new device can be introduced into the U.S. market, it must receive
from the FDA clearance or approval, either premarket notification clearance
under Section 510(k) of the FDC Act or approval pursuant to the more costly
and time-consuming PMA procedure. The Company's daily wear contact lenses are
generally subject to the 510(k) clearance procedure while its extended wear
contact lenses are subject to the PMA requirements. A PMA application must be
supported by valid scientific evidence to demonstrate the safety and
effectiveness of the device, typically including the results of clinical
trials, bench tests, laboratory and animal studies. The PMA must also contain
a complete description of the device and its components, and a detailed
description of the methods, faculties and controls used to manufacture the
device. In addition, the submission must include the proposed labeling,
advertising literature and any training materials. The PMA process can be
expensive, uncertain and lengthy, and a number of devices for which FDA
approval has been sought by other companies have never been approved for
marketing. Modifications to a device that is the subject of an approved PMA,
its labeling, or manufacturing process may require approval by the FDA of PMA
supplements or new PMAs. Supplements to a PMA often require the submission of
the same type of information required for an initial PMA, except that the
supplement is generally limited to that information needed to support the
proposed change from the product covered by the original PMA.
A 510(k) clearance will be granted if the submitted information establishes
that the proposed device is "substantially equivalent" to a legally marketed
Class I or Class II medical device or a Class III medical device for which the
FDA has not called for PMAs. For any devices that are cleared through the
510(k) process, modifications or enhancements that could significantly affect
safety or effectiveness, or constitute a major change in the intended use of
the device, will require new 510(k) submissions. While less expensive and
time-consuming than obtaining PMA clearance, securing 510(k) clearance may
involve the submission of a substantial volume of data, including clinical
data, and may require a substantive review of six months or more. The Company
markets
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contact lenses which have received 510(k) clearances as well as lenses which
have been the subject of approved PMA applications.
Any products manufactured or distributed pursuant to 510(k) clearance or an
approved PMA are subject to pervasive and continuing regulation by the FDA,
including recordkeeping requirements and reporting of adverse experience with
the use of the device.
The Company currently has over 20 PMAs and 510(k) clearances for its
products marketed in the United States. New products may require clinical
studies to support a PMA or 510(k) clearance. There is no certainty that
clinical studies involving new products will be completed in a timely manner
or that the data and information obtained will be sufficient to support the
filing of a PMA or 510(k) clearance. There can be no assurance that the
Company will be able to obtain necessary approvals to market new devices or
any other products under development on a timely basis, if at all, and delays
in receipt or failure to receive such approvals, the loss of previously
received approvals, or failure to comply with existing or future regulatory
requirements could have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company has made modifications to its devices which the Company believes
do not require the submission of new 510(k) notices or PMA supplements. There
can be no assurance, however, that the FDA would agree with any of the
Company's determinations not to submit a new 510(k) notice or PMA supplement
for any of these changes or would not require the Company to submit a new
510(k) notice or PMA supplement for any of the changes made to the device. If
the FDA requires the Company to submit a new 510(k) notice or PMA supplement
for any device modification, the Company may be prohibited from marketing the
modified device until the 510(k) notice or PMA supplement is cleared by the
FDA. There can be no assurance that future clearances or approvals, whether
under the 510(k) clearance procedure or the PMA procedure, will be obtained in
a timely fashion or at all. The failure to obtain such clearances or approvals
in a timely fashion or at all could have a material adverse effect on the
Company's business, financial condition or results of operations.
If human clinical trials of a device are required, whether for a 510(k) or a
PMA, and the device presents a "significant risk," the sponsor of the trial
(usually the manufacturer or the distributor of the device) is required to
file an investigational device exemption ("IDE") application prior to
commencing human clinical trials. IDE regulations generally require FDA
approval and approval by an independent institutional review board before a
clinical study may begin. Conforming with IDE regulations can add significant
cost and/or delay to the process of obtaining FDA approval for a medical
device. Submission of an application IDE does not give assurance that the FDA
will approve the IDE application and, if it is approved, there can be no
assurance that the FDA will determine that the data derived from these studies
support the safety and efficacy of the device or warrant the continuation of
clinical studies. Sponsors of clinical trials are permitted to sell
investigational devices distributed in the course of the study provided such
compensation does not exceed recovery of the costs of manufacture, research,
development and handling. An IDE supplement must be submitted to and approved
by the FDA before a sponsor or investigator may make a change to the
investigational plan that may affect its scientific soundness or the rights,
safety or welfare of human subjects.
As a manufacturer of medical devices, the Company is required to register
with the FDA and comply with the FDA's good manufacturing practice
regulations. GMP Regulations require that the Company manufacture its products
and maintain its manufacturing, testing and control activities records in a
prescribed manner. Further, the Company is required to comply with FDA
requirements for labeling and promoting its products. The Company is subject
to periodic inspections by the FDA and can be subjected to a number of
regulatory actions if it is found not to be in compliance with applicable laws
and regulations. If the FDA believes that a company may not be operating in
compliance with applicable laws and regulations, it can record its
observations on a form FDA 483; place the company under observation and
reinspect the facilities; institute proceedings to issue a warning letter
apprising of violative conduct; detain or seize products; mandate a recall;
enjoin future violations; and assess civil and criminal penalties against the
company, its officers or its employees. In addition, clearances or approvals
could be withdrawn in appropriate circumstances. Failure to comply with
regulatory requirements or any adverse regulatory action could have a material
adverse affect on the Company. On occasion, the
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<PAGE>
Company has received notifications from the FDA of alleged deficiencies in the
Company's compliance with FDA requirements. The Company's Sunnyvale,
California; San Diego, California; Southampton, United Kingdom; Cidra, Puerto
Rico; and Des Plaines, Illinois facilities have been inspected within the past
two years. Two form FDA 483s were issued. The Company responded to one such
form with corrective action which the FDA accepted. In March 1996, the Company
objected to the other form as unfounded. The Company has received no further
communications from the FDA on such matter. The Company does not expect such
inspections to give rise to any material FDA compliance issues or to otherwise
have a material adverse effect on the Company.
Manufacturers of medical devices for marketing in the United States must
also comply with medical device reporting ("MDR") requirements that a firm
report to FDA any incident in which its product may have caused or contributed
to a death or serious injury, or in which its product malfunctioned and, if
the malfunction were to recur, it would be likely to cause or contribute to a
death or serious injury. Labeling and promotional activities are subject to
scrutiny by the FDA and, in certain circumstances, by the FTC. Current FDA
enforcement policy prohibits the marketing of approved medical devices for
unapproved uses.
The Company is subject to routine inspection by the FDA and certain state
agencies for compliance with GMP requirements, MDR requirements, and other
applicable regulations. The FDA has recently finalized changes to the GMP
regulations, including the addition of design control requirements, which will
likely increase the cost of compliance with GMP requirements. There can be no
assurance that the Company will not incur significant costs to comply with
laws and regulations in the future or that laws and regulations will not have
a material adverse effect upon the Company's business, financial condition or
results of operation. The Company believes that all of its products offered
for sale have received all required FDA approvals or clearance, and that it is
in substantial compliance with FDA regulations, including GMP and MDR
requirements.
The Company also is subject to numerous federal, state and local laws
relating to such matters as safe working conditions, manufacturing practices,
environmental protection, fire hazard control and disposal of hazardous or
potentially hazardous substances. There can be no assurance that the Company
will not be required to incur significant costs to comply with such laws and
regulations in the future or that such laws or regulations will not have a
material adverse effect upon the Company's ability to do business.
International Regulation. The Company's products are also subject to
regulation in other countries in which it sells its products. The laws and
regulations of such countries range from comprehensive medical device approval
procedures such as those described above to simple requests for product data
or certifications. The number and scope of these laws and regulations are
increasing. In particular, medical devices in the European Union ("EU") are
subject to the EU's new medical devices directive (the "Directive").
Under the system established by the Directive, all medical devices other
than active implants and in vitro diagnostic products must qualify for CE
marking by June 14, 1998. "CE marking" means the manufacturer certifies that
its product bearing the CE mark satisfies all requirements essential for the
product to be considered safe and fit for its intended purpose. During the
transitional period (from January 1, 1995 to June 14, 1998) medical devices
can be placed on the market and put into service if they comply with the
requirements of the Directive or national requirements that were in force on
December 31, 1994.
In order to qualify for CE marking, the manufacturer must comply with the
"Essential Requirements" of the Directive, relating to the safety and
performance of the product. In order to demonstrate compliance, a manufacturer
is required to undergo a conformity assessment, which includes assessment of
the manufacturer's quality assurance system by self-selected certification
organizations referred to as a "Notified Body." After all necessary conformity
assessment tests have been completed to the satisfaction of the Notified Body
and the manufacturer is convinced that it is in full compliance with the
Directive, CE marking may be affixed on the products concerned. The Company
has undergone such conformity assessment, with two Dutch and one British non-
governmental entities chosen by the Company as it Notified Bodies. The Company
has received CE marking authorization for all products it currently markets in
the EU.
Although member countries must accept for marketing medical devices bearing
a CE marking without imposing further requirements related to product safety
and performance, each country may require the use of its
59
<PAGE>
own language or labels and instructions for use. "National Competent
Authorities" who are required to enforce compliance with the requirements of
the Directive, can restrict, prohibit and recall CE-marked products if they
are unsafe. Such a decision must be confirmed by the European commission in
order to be valid. Member countries can impose additional requirements as long
as they do not violate the Directive or constitute technical barriers to
trade.
Additional approvals from foreign regulatory authorities may be required for
international sale of the Company's products in non-EU countries. Failure to
comply with applicable regulatory requirements can result in loss of
previously received approvals and other sanctions and could have a material
adverse effect on the Company's business, financial condition and results of
operations.
EMPLOYEES
As of September 28, 1996 (giving effect to the Barnes-Hind Acquisition), the
Company had approximately 2,600 full-time and part-time employees, including
1,671 in the United States (including Puerto Rico), 906 in Europe, and 24 in
the rest of the world. The Barnes-Hind Acquisition resulted in the addition of
approximately 1,583 full-time and part-time employees, including 703 in the
United States, 858 in Europe and 22 in the rest of the world. The Company has
no collective bargaining agreements with any union and believes that its
overall relations with employees are satisfactory.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
The Company is subject to federal, state, local and foreign environmental
laws and regulations and is subject to liabilities and compliance costs
associated with the past and current handling, processing, storing and
disposing of hazardous substances and wastes. The Company's operations are
also subject to federal, state and local occupational health and safety laws
and regulations. The Company devotes resources to maintaining environmental
regulatory compliance and managing environmental risk and believes that it
conducts its operations in substantial compliance with applicable
environmental and occupational health and safety laws and regulations. The
Company does not expect to incur material capital expenditures for
environmental controls in the current or succeeding fiscal year.
In connection with the Wesley Jessen Acquisition and the Barnes-Hind
Acquisition, the respective sellers, subject to certain limitations, agreed to
retain responsibility for, and indemnify the Company from and against, certain
environmental matters. These matters include addressing a limited area of
historical contamination at the Company's Des Plaines facility and settling
any liability of Barnes-Hind at a superfund site located in Whittier,
California. Notwithstanding these contractual agreements, the Company could be
pursued in the first instance by governmental authorities or third parties
with respect to certain indemnified matters, subject to the Company's right to
seek indemnification from the appropriate seller. Management does not
currently believe that any such matter will have a material adverse effect on
the business or financial condition of the Company.
REQUIRED DIVESTITURE
In connection with the Barnes-Hind Acquisition, the Company was required to
file a notice with the FTC and the Department of Justice under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended. In connection with such
filing, the FTC requested additional information regarding the effect of the
Barnes-Hind Acquisition on competition in the opaque contact lens market
(opaque lenses change the color of dark eyes). Subsequently, the Company and
the FTC entered into a voluntary consent order which provides, among other
things, that the Company must divest Barnes-Hind's U.S. Natural Touch Product
Line by January 24, 1997 to an FTC-approved acquiror for the purpose of
creating an independent competitor in the opaque contact lens market. The
Company also agreed to supply the acquiror with opaque contact lenses for at
least 18 months following such divestiture, to license on a royalty-free basis
certain patents related to the manufacture, import, offer for sale, sale and
use of opaque contact lenses in the United States and to allow an FTC-
appointed trustee to monitor
60
<PAGE>
the divestiture. If the Company fails to divest the U.S. Natural Touch Product
Line according to the terms of the consent order or if the FTC terminates the
divestiture for certain reasons specified in the consent order, the FTC may
direct an independent trustee to divest the U.S. Natural Touch Product Line.
For a period of 10 years after the order becomes final, the Company is
prohibited from acquiring more than a 5% interest in, or certain assets of,
any entity engaged in the opaque contact lens business in the United States
and must notify the FTC in advance of any proposed change in its corporate
structure. The Company is required to file compliance reports showing that it
has fully complied with the consent order and may be liable for civil
penalties for each violation of the consent order. The Company is currently
seeking a suitable acquiror for the U.S. Natural Touch Product Line. The U.S.
Natural Touch Product Line generated net sales of approximately $6.9 million
in the twelve months ended March 31, 1996. The Company does not believe that
the disposition of the U.S. Natural Touch Product Line will have a material
impact on the Company's results of operations.
LEGAL PROCEEDINGS
The Company is currently a party to various claims and legal actions which
arise in the ordinary course of business. The Company believes such claims and
legal actions, individually or in the aggregate, will not have a material
adverse effect on the business, financial condition or results of operations
of the Company. The Company carries insurance coverage in the types and
amounts that management considers reasonably adequate to cover the risks it
faces in the industry in which it competes. There can be no assurance,
however, that such insurance coverage will be adequate to cover all losses
which the Company may incur in future periods.
In connection with the Barnes-Hind Acquisition, Pilkington agreed, subject
to certain limitations, to retain responsibility for, and indemnify the
Company from and against, certain litigation and other claims. Notwithstanding
these contractual agreements, the Company could be pursued in the first
instance by third parties with respect to certain indemnified matters, subject
to the Company's right to seek indemnification from such seller. Management
does not currently believe that any such matter will have a material adverse
effect on the business or financial condition of the Company.
61
<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth certain information with respect to the
Directors, executive officers and certain key employees of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Stephen G. Pagliuca..... 41 Chairman of the Board
Kevin J. Ryan........... 55 President, Chief Executive Officer and Director
Edward J. Kelley........ 48 Vice President, Finance, Chief Financial Officer
and Director
Raleigh S. Althisar..... 47 Vice President, Worldwide Manufacturing
Lawrence L. Chapoy...... 53 Vice President, Research & Development
William M. Flynn........ 38 Vice President, Pan Asia
Joseph F. Foos.......... 44 Vice President, Scientific Affairs
George H. McCrary....... 53 Vice President, Americas
Daniel M. Roussel....... 47 Vice President, Europe
Thomas F. Steiner....... 50 Vice President, Marketing
Adam W. Kirsch.......... 35 Executive Vice President and Director
John W. Maki............ 36 Vice President and Director
John J. O'Malley........ 49 Director
</TABLE>
The Company anticipates that two or three additional Directors not otherwise
affiliated with the Company or any of its stockholders will be elected by the
Board of Directors following the completion of the Offering.
STEPHEN G. PAGLIUCA has been Chairman of the Board of the Company since June
1995 and a Director of the Company since its incorporation. Mr. Pagliuca has
been a Managing Director of Bain Capital since May 1993 and a general partner
of Bain Venture Capital since 1989, where he founded Information Partners.
Prior to joining Bain Venture Capital, Mr. Pagliuca was a partner at Bain &
Company, where he provided strategic and operational advice for clients in the
healthcare and information industries. He also worked as a senior accountant
and international tax specialist for Peat Marwick Mitchell & Company in the
Netherlands. Mr. Pagliuca serves as Chairman of the Board of Dade
International Inc. and Physio-Control International Corporation. He also
serves as a director of several other companies including Coram Healthcare
Corporation, Gartner Group, Inc., Medical Specialties Group, Inc., Physician
Quality Care and VIVRA.
KEVIN J. RYAN has served as President, Chief Executive Officer and a
Director of the Company since June 1995. From 1991 to 1995, Mr. Ryan was
President of BioSource Genetics Corporation. From 1987 to 1990, Mr. Ryan
served as President of the Barnes-Hind contact lens business; from 1983 to
1987, as President of Revlon VisionCare (a division of Revlon, Inc.); and from
1978 to 1983, as President of Barnes-Hind (then a part of Revlon VisionCare).
EDWARD J. KELLEY has served as Vice President, Finance, Chief Financial
Officer and a Director of the Company since July 1995. Prior to joining the
Company, Mr. Kelley served as the President, Asia Pacific and Latin America of
Barnes-Hind and its Chief Financial Officer. Prior to joining Barnes-Hind, Mr.
Kelley held positions of increasing responsibility with Simon & Schuster,
Revlon Health Care and Peat Marwick Mitchell & Company.
RALEIGH S. ALTHISAR has served as Vice President, Worldwide Manufacturing of
the Company since October 1996. Prior to joining the Company, Mr. Althisar
served as Executive Vice President, Worldwide Manufacturing of Barnes-Hind.
Prior thereto, he held positions of increasing responsibility with the Sola
division of Barnes-Hind, Suntex Ophthalmics, Retail Optical Management and
Milton Roy Ophthalmics.
LAWRENCE L. CHAPOY has served as Vice President, Research & Development of
the Company since 1993. Prior to joining the Company, Dr. Chapoy spent eight
years with Mont Edison Chemical Company as a Project Researcher and fifteen
years as a University Professor at the Polytechnic University of Denmark.
WILLIAM M. FLYNN has served as the Vice President, Pan Asia of the Company
since 1994. Prior to being named to his current position, Mr. Flynn served as
International Finance Manager for two years and in the
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<PAGE>
other positions in the Finance Department of Schering-Plough Corporation for
two years. In addition, Mr. Flynn held a variety of finance positions with
Prudential Insurance Company of America and RCA Records.
JOSEPH F. FOOS has served as Vice President, Scientific Affairs of the
Company since 1994. Mr. Foos joined Wesley Jessen in 1987 and has served as
Manager, Quality for two years, Project Manager for Research and Development
Pilot Manufacturing and various other positions of increasing responsibility.
GEORGE H. MCCRARY has served as Vice President, Americas of the Company
since 1996. Prior to joining the Company, Mr. McCrary worked for Pracon
Communications, a Reed Elsevier Medical Company, as Vice President, General
Manager. Prior thereto, Mr. McCrary held the position of Senior Vice President
of Sales, Marketing and Distribution for Foster Grant Corporation and prior to
that, Vice President Sales and Marketing, Consumer Products Division for the
Revlon VisionCare. Before joining Revlon VisionCare, he held sales and
marketing positions of increasing responsibility with the Warner Lambert
Company.
DANIEL M. ROUSSEL has served as Vice President, Europe of the Company since
1995. Previously, Mr. Roussel served for three years as General Manager Wesley
Jessen, France and in marketing positions with Schering-Plough for eight years
prior thereto.
THOMAS F. STEINER has served as Vice President, Marketing of the Company
since 1996. Mr. Steiner has served in various marketing-related positions
since joining the Company in 1982. Prior to joining the Company, Mr. Steiner
worked at Sara Lee Corporation for seven years as Group Product Manager and
Project Research Manager. Mr. Steiner also worked at J. Walter Thompson
Company as Associate Research Director.
ADAM W. KIRSCH has been Executive Vice President of the Company since June
1995 and a Director of the Company since its incorporation. Mr. Kirsch has
been a Managing Director of Bain Capital since May 1993 and a general partner
of Bain Venture Capital since 1990. Mr. Kirsch joined Bain Venture Capital in
1985 as an associate, and prior to joining Bain Venture Capital, Mr. Kirsch
was a consultant at Bain & Company, where he worked in mergers and
acquisitions. He serves on the board of several companies including Duane
Reade, Inc., Stage Stores, Inc., Brookstone, Inc. and Dade International Inc.
JOHN W. MAKI has been a Director of the Company since November 1996 and a
Vice President of the Company since June 1995. Mr. Maki has been a Principal
at Bain Capital since 1995 and was an associate at Bain Capital from 1993 to
1995 and at Bain Venture Capital from 1988 to 1993. Prior to joining Bain
Venture Capital, Mr. Maki was a consultant at Bain & Company, where he
specialized in healthcare and consumer product companies. He also serves on
the board of Medical Specialties Group, Inc.
JOHN J. O'MALLEY has been a Director of the Company since November 1996. Mr.
O'Malley has been an Executive Vice President of Bain Capital since 1993. From
1991 to 1993, Mr. O'Malley was President and Chief Executive Officer of
Robertson Ceco, an international construction products and engineering
company. From 1986 to 1991, he was Executive Vice President of HMK Group Inc.,
a diversified manufacturing and services company. Mr. O'Malley is also a
director of Physio-Control International Corporation, GS Industries, Inc. and
Medical Specialties Group, Inc.
Directors of the Company are currently elected annually by its stockholders
to serve during the ensuing year or until their respective successors are duly
elected and qualified. Executive officers of the Company are duly elected by
the Board of Directors to serve until their respective successors are elected
and qualified. There are no family relationships between any of the Directors
or executive officers of the Company.
Prior to the completion of the Offering, the Board will be divided into
three classes, as nearly equal in number as possible, with each Director
serving a three-year term and one class being elected at each year's annual
meeting of stockholders. Messrs. Maki and one or two of the additional
directors anticipated to be appointed by the Board will be in the class of
directors whose term expires at the 1998 annual meeting of the Company's
stockholders. Messrs. Kirsch, Kelley and one of the additional directors
anticipated to be appointed by the Board following the Offering will be in the
class of directors whose term expires at the 1999 annual meeting of the
Company's stockholders. Messrs. Pagliuca, Ryan and O'Malley following the
Offering will be in the class of directors whose term expires at the 2000
annual meeting of the Company's stockholders. At each annual meeting of the
Company's stockholders, successors to the class of directors whose term
expires at such meeting will be elected to serve for three-year terms and
until their respective successors are elected and qualified.
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<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation paid
or accrued for the year ended December 31, 1995 for the Chief Executive
Officer and each of the four other most highly compensated executive officers
of the Company as of the end of the last fiscal year (the "Named Executives").
The amounts shown include the combined compensation for services in all
capacities that were provided to the Predecessor from January 1, 1995 through
June 28, 1995, and to the Company from June 29, 1995 through December 31,
1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------ ------------
OTHER ANNUAL SECURITIES
NAME AND PRINCIPAL COMPENSATION UNDERLYING ALL OTHER
POSITION YEAR SALARY ($) BONUS ($) (A) ($) (B) OPTIONS (#) COMPENSATION ($)
- ------------------ ---- ---------- ------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Kevin J. Ryan (c)....... 1995 $127,885 $125,000 -- 325,000 $ 720(d)
President and Chief Ex-
ecutive Officer
Edward J. Kelley (e).... 1995 83,574 87,500 -- 75,000 145(d)
Chief Financial Officer
and Vice President, Fi-
nance
Lawrence L. Chapoy...... 1995 143,800 10,000 -- 21,429 5,870(f)
Vice President, Research
&
Development
Daniel M. Roussel....... 1995 127,339 4,000 -- 42,858 --
Vice President, Europe
Thomas F. Steiner....... 1995 120,000 18,000 -- 32,142 9,404(g)
Vice President, Market-
ing
</TABLE>
- --------
(a) Reflects bonuses received by such Named Executives in 1996 as a result of
the Company meeting certain performance targets in 1995.
(b) None of the perquisites and other benefits paid to each Named Executive in
1995 exceeded 10% of the total annual salary and bonus received by such
Named Executive during that year.
(c) Mr. Ryan commenced employment with the Company in June 1995.
(d) Reflects premium payments made by the Company on behalf of such Named
Executives for life insurance.
(e) Mr. Kelley commenced employment with the Company in July 1995.
(f) Includes $5,329 paid by Schering-Plough under its Profit Sharing Plan
prior to the Wesley Jessen Acquisition and $541 as a result of premium
payments made by the Company on behalf of Mr. Chapoy for life insurance.
(g) Includes $9,003 paid by Schering-Plough under its Profit Sharing Plan
prior to the Wesley Jessen Acquisition and $401 as a result of premium
payments made by the Company on behalf of Mr. Steiner for life insurance.
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<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding stock options granted
by the Company to the Named Executives during the Company's last fiscal year
(without giving effect to the Reclassification and the Stock Split).
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE
APPRECIATION
FOR OPTION
TERM (3)
--------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS MARKET PRICE
UNDERLYING GRANTED TO EXERCISE OR ON DATE OF
OPTIONS EMPLOYEES IN BASE PRICE GRANT EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SHARE) ($/SHARE) (1) DATE (2) 5%($) 10%($)
- ---- ----------- ------------ ----------- ------------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Kevin J. Ryan .......... 125,000(4) 19.2% $0.08 $0.08 4/05/06 $6,250 $16,250
100,000(5) 15.4 3.70 0.08 4/05/06 -- --
100,000(5) 15.4 7.33 0.08 4/05/06 -- --
Edward J. Kelley ....... 25,000(4) 3.8 0.08 0.08 4/05/06 1,250 4,000
25,000(5) 3.8 3.70 0.08 4/05/06 -- --
25,000(5) 3.8 7.33 0.08 4/05/06 -- --
Lawrence L. Chapoy ..... 7,143(6) 1.1 0.08 0.08 4/05/06 357 1,714
7,143(5) 1.1 3.70 0.08 4/05/06 -- --
7,143(5) 1.1 7.33 0.08 4/05/06 -- --
Daniel M. Roussel ...... 14,286(6) 2.2 0.08 0.08 4/05/06 714 2,286
14,286(5) 2.2 3.70 0.08 4/05/06 -- --
14,286(5) 2.2 7.33 0.08 4/05/06 -- --
Thomas F. Steiner ...... 10,714(6) 1.6 0.08 0.08 4/05/06 536 1,714
10,714(5) 1.6 3.70 0.08 4/05/06 -- --
10,714(5) 1.6 7.33 0.08 4/05/06 -- --
</TABLE>
- --------
(1) Market price was determined in good faith by the Company's Board of
Directors on the date of grant and is equal to the price paid by the
Company's investors for the Common Stock at the time of the Wesley Jessen
Acquisition.
(2) Unexercisable options will expire on the date of the termination of the
executive officer's employment with the Company or any of its subsidiaries
for any reason. Exercisable options will expire the earlier of 30 days
after the date of termination or April 5, 2006.
(3) Amounts reflect certain assumed rates of appreciation set forth in the
executive compensation disclosure rules of the Securities and Exchange
Commission (the "Commission"). Actual gains, if any, on stock option
exercises depend on future performance of the Company's stock and overall
market conditions. At an annual rate of appreciation of 5% per year for
the option term, the price of the Common Stock would be approximately
$0.13 per share. At an annual rate of appreciation of 10% per year for the
option term, the price of the Common Stock would be approximately $0.21
per share.
(4) Such options are scheduled to vest in equal installments over a four-year
period beginning on June 28, 1996. Under certain circumstances, such
options become immediately exercisable. See "--Stock Options--1995 Stock
Plan."
(5) Such options were immediately exercisable on the date of grant.
(6) Such options are scheduled to vest in equal installments over a five-year
period beginning on April 5, 1996. Under certain circumstances, such
options become immediately exercisable. See "--Stock Options--1995 Stock
Plan."
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<PAGE>
FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning options outstanding at
the end of the last fiscal year held by the Named Executives (without giving
effect to the Reclassification or the Stock Split). There were no options
exercised in the last fiscal year for securities of the Company.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END (#) AT FY-END ($)
ACQUIRED ON VALUE ------------------------- -----------------------------
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE/EXERCISABLE UNEXERCISABLE/EXERCISABLE (1)
- ---- ------------ ------------ ------------------------- -----------------------------
<S> <C> <C> <C> <C>
Kevin J. Ryan........... -- -- 125,000/200,000 0/0
Edward J. Kelley........ -- -- 25,000/50,000 0/0
Lawrence L. Chapoy...... -- -- 7,143/14,286 0/0
Daniel M. Roussel....... -- -- 14,286/28,572 0/0
Thomas F. Steiner....... -- -- 10,714/21,428 0/0
</TABLE>
- --------
(1) Assumes a fair market value of the Common Stock at December 31, 1995 equal
to $0.08 per share.
DIRECTOR COMPENSATION
Directors of the Company currently do not receive a salary or an annual
retainer for their services. The Company expects, however, that new non-
employee Directors not otherwise affiliated with the Company or its
stockholders will be paid an annual cash retainer of $10,000 and will be
reimbursed for all reasonable expenses incurred in attending Board meetings.
Such Directors will also be entitled to participate in the Company's 1997 Non-
Employee Directors Stock Option Plan.
COMMITTEES OF THE BOARD OF DIRECTORS
Prior to the Offering, the Board of Directors of the Company (the "Board of
Directors" or the "Board") had no formal committees. Immediately prior to the
completion of the Offering, the Board of Directors will establish two
committees: (i) an Audit Committee and (ii) a Compensation Committee.
The Audit Committee will make recommendations to the Board of Directors
regarding the independent auditors to be nominated for election by the
stockholders and will review the independence of such auditors, approve the
scope of the annual audit activities of the independent auditors, approve the
audit fee payable to the independent auditors and review such audit results.
The Audit Committee is expected to be comprised of a majority of Directors not
otherwise affiliated with the Company or its stockholders. Price Waterhouse
LLP presently serves as the independent auditors of the Company.
The duties of the Compensation Committee will be to provide a general review
of the Company's compensation and benefit plans to ensure that they meet
corporate objectives. In addition, the Compensation Committee will review the
President's recommendations on (i) compensation of all officers of the Company
and (ii) adopting and changing major Company compensation policies and
practices, and report its recommendations to the whole Board of Directors for
approval and authorization. The Compensation Committee will administer the
Company's Stock Plans and is expected to be comprised of at least two non-
employee Directors (as defined in Rule 16b-3 under the Exchange Act). The
Board may also establish other committees to assist in the discharge of its
responsibilities.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the Offering, the Company did not have a compensation committee.
Instead, compensation decisions regarding the Company's executive officers
were made by the Board of Directors. Messrs. Ryan and Kelley, both executive
officers of the Company, serve on the Board of Directors of the Company. The
compensation for both Messrs. Ryan and Kelley for the year ended December 31,
1995 was established pursuant to the terms of their respective employment
agreements with the Company.
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<PAGE>
EMPLOYMENT AGREEMENTS
On June 28, 1995, the Company and Kevin J. Ryan entered into an employment
agreement (the "Employment Agreement"), pursuant to which Mr. Ryan agreed to
serve as President and Chief Executive Officer of the Company for a period
that will end with Mr. Ryan's resignation, death or disability, or upon
termination by the Company, with or without cause. Under the Employment
Agreement, Mr. Ryan will receive (i) an annual base salary equal to at least
$250,000; (ii) an annual bonus based on the Company's achievement of certain
targeted operating results; and (iii) certain fringe benefits. If Mr. Ryan's
employment is terminated by the Company without cause (as defined therein), he
will be entitled to receive his base salary and fringe benefits for 12 months
following such termination in addition to his bonus for the year in which his
employment was terminated, pro rated based on the number of days elapsed in
the year, if he would have otherwise been entitled to receive such bonus had
he not been terminated. Mr. Ryan has agreed not to compete with the Company
for a period of one year following his termination of employment with the
Company and not to disclose any confidential information at any time without
the prior written consent of the Company.
On June 28, 1995, Edward J. Kelley entered into an employment agreement with
the Company containing substantially similar terms as those described above.
Under such agreement, Mr. Kelley has agreed to serve as the Chief Financial
Officer of the Company for (i) an annual base salary equal to at least
$175,000; (ii) an annual bonus based on the Company's achievement of certain
targeted operating results; and (iii) certain fringe benefits.
MANAGEMENT BONUS PLAN
In May 1996, the Board of Directors adopted the Wesley Jessen Corporation
Professional Incentive Plan for calendar year 1996 (the "Bonus Plan"). Under
the Bonus Plan, participants will be eligible to earn an annual bonus upon the
achievement of certain personalized operating achievement targets, anticipated
to be based on the Company's EBITDA and cash flow. The annual bonus will be
equal to a specified percentage of a participant's annual salary (the "Target
Percentage"), subject to increase based on achievement beyond targeted levels.
Bonuses under the Bonus Plan are not subject to any cap. The Company
anticipates approximately 65 employees will be eligible to participate in the
Bonus Plan for the 1996 fiscal year, including each of the Named Executives.
The Company anticipates that it will adopt similar bonus programs for 1997 and
thereafter.
STOCK OPTIONS
1995 Stock Plan. In connection with the Wesley Jessen Acquisition, the Board
of Directors adopted the Wesley-Jessen Holding, Inc. 1995 Stock Purchase and
Option Plan (the "1995 Stock Plan"), which authorized the grant of stock
options, including options that are intended to qualify as "incentive stock
options" within the meaning of Section 422 of the Internal Revenue Code
("ISOs"), and sales of Class L Common or Common Stock to current or future
employees, directors, consultants or advisors of the Company or its
subsidiaries. Under the 1995 Stock Plan, the Board was authorized to sell any
class or classes of Common Stock at any time prior to the termination of the
1995 Stock Plan in such quantity, at such price, on such terms and subject to
such conditions as established by the Board up to an aggregate of 15,000
shares of Class L Common and 835,000 shares of Common Stock (including shares
of Common Stock with respect to which options may be granted), subject to
adjustment upon the occurrence of certain events to prevent any dilution or
expansion of the rights of participants that might otherwise result from the
occurrence of such events. An aggregate of 15,000 shares of Class L Common and
135,000 shares of Common Stock were sold to members of the Company's
management and options to purchase an aggregate of 700,000 shares of Common
Stock were granted under the 1995 Stock Plan. Stock and options sold or
granted under the 1995 Stock Plan are subject to various restrictions that
limit the transferability of such shares and subject such shares to repurchase
at a predetermined price upon the termination of a participant's employment
with the Company. The 1995 Stock Plan was terminated in 1996.
The options granted under the 1995 Stock Plan consist of: (i) options to
purchase an aggregate of 150,000 shares of Common Stock that vest in equal
installments over a four-year period beginning on June 28, 1996 and
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<PAGE>
options to purchase an aggregate of 100,000 shares of Common Stock that vest
in equal installments over a five-year period beginning on April 5, 1996
(collectively, the "Time Vesting Options"), all of which have an exercise
price of $0.08059 per share; (ii) options to purchase an aggregate of 225,000
shares of Common Stock that were immediately exercisable on the date of grant
at an exercise price of $3.70 per share; and (iii) options to purchase an
aggregate of 225,000 shares of Common Stock that were immediately exercisable
on the date of grant at an exercise price of $7.33 per share. The Time Vesting
Options become immediately exercisable in the event the Company is sold or if
at any time after the Company completes an initial public offering, Bain
Capital and its related investors cease to own at least 20% of the outstanding
Common Stock.
1996 Stock Plan. On October 22, 1996, the Board of Directors and the
stockholders of the Company adopted the Wesley-Jessen Holding, Inc. 1996 Stock
Option Plan (the "1996 Stock Plan"). The 1996 Stock Plan authorizes the grant
of stock options, including ISOs, to current and future employees, Directors,
consultants and advisors of the Company or its subsidiaries. The 1996 Stock
Plan authorizes the granting of stock options up to an aggregate of 135,502
shares of Common Stock, subject to adjustment upon the occurrence of certain
events. The Company has granted options for all of the shares authorized by
the 1996 Stock Plan. Options to purchase an aggregate of 85,502 shares of
Common Stock were immediately exercisable on the date of grant at an exercise
price of $22.67 per share and options to purchase an aggregate of 50,000
shares of Common Stock vest in
equal installments over a five-year period beginning on October 22, 1997, at
an exercise price of $22.67 per share. No additional options will be granted
under the 1996 Stock Plan.
1997 Key Employee Stock Incentive Plan. Prior to consummation of the
Offering, the Board and stockholders of the Company will approve the Wesley
Jessen Vision Care, Inc. 1997 Key Employees Stock Incentive Plan (the "1997
Stock Plan"). The 1997 Stock Plan will be administered by a Compensation
Committee (the "Committee") composed of at least two Non-Employee Directors
(as that term is defined in Rule 16b-3 under the Exchange Act), who will be
appointed by the Board. Certain full-time, employees of the Company will be
eligible to participate in the 1997 Stock Plan (an "Employee Participant").
The Committee will be authorized under the 1997 Stock Plan to select the
Employee Participants and determine the terms and conditions of the awards
under the 1997 Stock Plan. The 1997 Stock Plan will provide for the issuance
of the following types of incentive awards: stock options, stock appreciation
rights, restricted stock, performance grants and other types of awards that
the Compensation Committee deems consistent with the purposes of the 1997
Stock Plan. An aggregate of shares of Common Stock of the Company have
been reserved for issuance under the 1997 Stock Plan, subject to certain
adjustments reflecting changes in the Company's capitalization. The 1997 Stock
Plan will provide that Employee Participants will be limited to receiving
awards relating to no more than shares of Common Stock per year.
Options granted under the 1997 Stock Plan may be either incentive stock
options ("ISOs") or such other forms of non-qualified stock options ("NQOs")
as the Committee may determine. ISOs are intended to qualify as "incentive
stock options" within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"). The exercise price of (i) an ISO granted to
an individual who owns shares possessing more than 10% of the total combined
voting power of all classes of stock of the Company (a "10% Owner") will be at
least 110% of the fair market value of a share of common stock on the date of
grant and (ii) an ISO granted to an individual other than a 10% Owner and an
NQO will be at least 100% of the fair market value of a share of Common Stock
on the date of grant.
Options granted under the 1997 Stock Plan may be subject to time vesting and
certain other restrictions at the sole discretion of the Committee. Subject to
certain exceptions, the right to exercise an option generally will terminate
at the earlier of (i) the first date on which the initial grantee of such
option is not employed by the Company for any reason other than termination
without cause, death or permanent disability or (ii) the expiration date of
the option. If the holder of an option dies or suffers a permanent disability
while still employed by the Company, the right to exercise all unexpired
installments of such option shall be accelerated and shall vest as of the
latest of the date of such death, the date of such permanent disability and
the date of the discovery of such permanent disability, and such option shall
be exercisable, subject to certain exceptions, for 90 days after such
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<PAGE>
date. If the holder of an option is terminated without cause, to the extent
the option has vested, such option will be exercisable for 30 days after such
date.
All outstanding awards under the 1997 Stock Plan will terminate immediately
prior to consummation of a liquidation or dissolution of the Company, unless
otherwise provided by the Board. In the event of the sale of all or
substantially all of the assets of the Company or the merger of the Company
with another corporation, all restrictions on any outstanding awards will
terminate and Employee Participants will be entitled to the full benefit of
their awards immediately prior to the closing date of such sale or merger,
unless otherwise provided by the Board.
The Board generally will have the power and authority to amend the 1997
Stock Plan at any time without approval of the Company's stockholders, subject
to applicable federal securities and tax laws limitations (including
regulations of the Nasdaq National Market).
EMPLOYEE STOCK PURCHASE PLAN
The Wesley Jessen Vision Care, Inc. Employee Stock Discount Purchase Plan
(the "Employee Stock Purchase Plan") will be approved by the Board and
stockholders prior to the consummation of the Offering. The Employee Stock
Purchase Plan will be established to give employees desiring to do so a
convenient means of purchasing shares of Common Stock through payroll
deductions. The Employee Stock Purchase Plan will provide an incentive to
participate by permitting purchases at a discounted price. The Company
believes that ownership of stock by employees will foster greater employee
interest in the success, growth and development of the Company.
Subject to certain restrictions, each employee of the Company who is a U.S.
resident or a U.S. citizen temporarily on location at a facility outside of
the United States will be eligible to participate in the Employee Stock
Purchase Plan if he or she has been employed by the Company for more than six
months. Participation will be discretionary with each eligible employee. The
Company will reserve shares of Common Stock for issuance in connection
with the Employee Stock Purchase Plan. Each eligible employee will be entitled
to purchase a maximum of shares per year. Elections to participate and
purchases of stock will be made on a quarterly basis. Each participating
employee contributes to the Employee Stock Purchase Plan by choosing a payroll
deduction in any specified amount, with a minimum deduction of $ per
payroll period. A participating employee may increase or decrease the amount
of such employee's payroll deduction, including a change to a zero deduction
as of the beginning of any calendar quarter. Elected contributions will be
credited to participants' accounts at the end of each calendar quarter. In
addition, employees may make lump sum contributions at the end of the year to
enable them to purchase the maximum number of shares available for purchase
during the plan year.
Each participating employee's contributions will be used to purchase shares
for the employee's share account within 15 days after the last day of each
calendar quarter. The cost per share will be 85% of the lower of the closing
price of the Company's Common Stock on the Nasdaq National Market on the first
or the last day of the calendar quarter. The number of shares purchased on
each employee's behalf and deposited in his/her share account will be based on
the amount accumulated in such participant's cash account and the purchase
price for shares with respect to any calendar quarter. Shares purchased under
the Employee Stock Purchase Plan carry full rights to receive dividends
declared from time to time. Under the Employee Stock Purchase Plan, any
dividends attributable to shares in the employee's share account will be
automatically used to purchase additional shares for such employee's share
account. Share distributions and share splits will be credited to the
participating employee's share account as of the record date and effective
date, respectively. A participating employee will have full ownership of all
shares in such employee's share account and may withdraw them for sale or
otherwise by written request to the Committee following the close of each
calendar quarter. Subject to applicable federal securities and tax laws, the
Board of Directors will have the right to amend or to terminate the Employee
Stock Purchase Plan. Amendments to the Employee Stock Purchase Plan will not
affect a participating employee's right to the benefit of the contributions
made by such employee prior to the date of any such amendment. In the event
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<PAGE>
the Employee Stock Purchase Plan is terminated, the Committee will be required
to distribute all shares held in each participating employee's share account
plus an amount of cash equal to the balance in each participating employee's
cash account.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The 1997 Non-Employee Director Stock Option Plan (the "Director Option
Plan") will be approved by the Board and stockholders prior to the
consummation of the Offering. The Director Option Plan will be established to
encourage stock ownership by certain Directors of the Company and to provide
those individuals with an additional incentive to manage the Company in the
shareholders' best interests and to provide a form of compensation that will
attract and retain highly qualified individuals as members of the Board. The
Director Option Plan will provide for the granting of options to non-employee
Directors, as defined, covering an aggregate of shares of Common Stock
of the Company, subject to certain adjustments reflecting changes in the
Company's capitalization.
The Committee or the full Board will be authorized under the Director Option
Plan to grant options and determine the terms and conditions of the options.
The Director Option Plan will provide, however, that the terms of each option
granted thereunder may not exceed ten years from the date of grant and the
option price for each option must equal 100% of the fair market value of the
Company's Common Stock on the date the option is granted. In consideration of
the grant of an option, an optionee will be required to agree to continue to
serve as a Director of the Company for the lesser of one year from the date
the option is granted or for the remainder of the optionee's term as a
Director of the Company. Notwithstanding this requirement, nothing contained
in the Director Option Plan or any agreement to be executed pursuant to the
Director Option Plan will obligate the Company, its Board or its stockholders
to retain an optionee as a Director of the Company. No options have been
granted under the Director Option Plan to date. The Company expects that new
and existing non-employee Directors will be granted options to purchase an
aggregate of shares of Common Stock upon being elected to the Board or
upon the effectiveness of the Plan, and will receive additional options
upon each anniversary of their election to the Board (which will be granted at
the Company's next annual meeting of stockholders following such anniversary).
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PRINCIPAL STOCKHOLDERS
The table below sets forth certain information regarding the equity
ownership of the Company (a) as of November 30, 1996 and (b) immediately
following the Offering and giving effect to the Reclassification and Stock
Split (at an assumed public offering price of $ per share), by: (i) each
person or entity who beneficially owns five percent or more of the Common
Stock or Class L Common; (ii) each Director and the Named Executives; and
(iii) all Directors and executive officers of the Company as a group. Unless
otherwise stated, each of the persons named in the table has sole voting and
investment power with respect to the securities beneficially owned by it or
him as set forth opposite its or his name. Beneficial ownership of the Common
Stock and Class L Common listed in the table has been determined in accordance
with the applicable rules and regulations promulgated under the Exchange Act.
The actual number of shares of Common Stock to be issued to each existing
stockholder in the Reclassification and the Stock Split is subject to change
based upon changes in the initial public offering price. See "The
Reclassification."
<TABLE>
<CAPTION>
AFTER THE
PRIOR TO THE OFFERING OFFERING
----------------------------------- -----------------
COMMON STOCK CLASS L COMMON COMMON STOCK
----------------- ----------------- -----------------
NUMBER OF NUMBER OF NUMBER OF
NAME AND ADDRESS SHARES PERCENT SHARES PERCENT SHARES PERCENT
- ---------------- --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
PRINCIPAL STOCKHOLDERS:
Bain Capital Funds (2)...... 3,679,774 90.0% 306,778 95.6% %
c/o Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
BT Investment Partners, Inc. 220,582 5.4 -- --
(3) ........................
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
DIRECTORS AND EXECUTIVE OF-
FICERS:
Stephen G. Pagliuca (4)(5) . 3,679,774 90.0 306,778 95.6
Kevin J. Ryan (6)(7) ....... 337,620 7.7 5,600 1.7
Edward J. Kelley (8) ....... 88,625 2.1 1,867 *
Lawrence L. Chapoy (9) ..... 21,329 * 267 *
Daniel M. Roussel (10)...... 42,659 * 533 *
Thomas F. Steiner (11) ..... 31,995 * 400 *
Adam W. Kirsch (4)(5)....... 3,679,774 90.0 306,778 95.6
John W. Maki (4)(5) ........ 509,101 12.5 42,237 13.2
John J. O'Malley (4)(5) .... 509,101 12.5 42,237 13.2
All Directors and executive
officers as a group (13
persons) (12) ............. 4,256,337 93.4% 316,085 98.4% %
</TABLE>
- -------
*Represents less than one percent.
(1) Assumes no exercise of the Underwriters' over-allotment option and does
not give effect to any purchases, if any, by such persons named in the
table in the Offering.
(2) Shares owned prior to the Reclassification and Stock Split include
1,498,947 shares of Common Stock and 123,363 shares of Class L Common
Stock held by Bain Capital Fund IV, L.P. ("Fund IV"); 1,701,699 shares of
Common Stock and 141,178 shares of Class L Common held by Bain Capital
Fund IV-B, L.P. ("Fund IV-B"); 216,498 shares of Common Stock and 34,538
shares of Class L Common held by BCIP
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Associates ("BCIP"); and 292,603 shares of Common Stock and 7,699 shares
of Class L Common held by BCIP Trust Associates, L.P. ("BCIP Trust" and
collectively, the "Bain Capital Funds").
(3) BT Investment Partners, Inc. ("BTIP") owns 5.4% of the Common Stock prior
to the Offering. The 220,582 shares of Common Stock owned by BTIP
represents 4.99% of the aggregate outstanding shares of Common Stock and
Class L Common. The Common Stock and Class L Common are identical in all
respects (including as to voting on all matters to be voted on by the
Company's stockholders), except that each share of Class L Common is
entitled to a Preference Amount. BTIP also is a limited partner in Fund
IV.
(4) The address of such person is c/o Bain Capital, Inc., Two Copley Place,
Boston, Massachusetts 02116.
(5) Messrs. Pagliuca, Kirsch, Maki and O'Malley are each Directors of the
Company. Messrs. Pagliuca and Kirsch are each general partners of the
Bain Capital Funds and, accordingly, may be deemed to beneficially own
shares owned by the Bain Capital Funds. Messrs. Maki and O'Malley are
each general partners of BCIP and limited partners of BCIP Trust and,
accordingly, may be deemed to beneficially own shares owned by such
funds. Each such person disclaims beneficial ownership of any such shares
in which he does not have a pecuniary interest.
(6) The address of such person is c/o the Company, 333 East Howard Avenue,
Des Plaines, Illinois 60018-5903.
(7) Shares owned prior to the Reclassification and the Stock Split include
270,120 shares of Common Stock that can be acquired through currently
exercisable options. Certain of Mr. Ryan's shares are held by an
individual retirement account for his sole benefit.
(8) Shares owned prior to the Reclassification and the Stock Split include
66,125 shares of Common Stock that can be acquired through currently
exercisable options. Certain of Mr. Kelley's shares are held by an
individual retirement account for his sole benefit.
(9) Shares owned prior to the Reclassification and the Stock Split include
18,115 shares of Common Stock that can be acquired through currently
exercisable options.
(10) Shares owned prior to the Reclassification and the Stock Split include
36,231 shares of Common Stock that can be acquired through currently
exercisable options.
(11) Shares owned prior to the Reclassification and the Stock Split include
27,173 shares of Common Stock that can be acquired through currently
exercisable options.
(12) Shares owned prior to the Reclassification and the Stock Split include an
aggregate of 464,385 shares of Common Stock that can be acquired through
currently exercisable options held by the executive officers of the
Company.
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<PAGE>
The Selling Stockholders have granted the Underwriters an option to purchase
up to an aggregate of additional shares of Common Stock to cover over-
allotments, if any. The following table sets forth certain information
regarding the equity ownership of the Company by such Selling Stockholders
assuming the Underwriters' option is exercised in full:
<TABLE>
<CAPTION>
COMMON STOCK OWNED
AFTER THE OFFERING
NUMBER OF SHARES -----------------------
OFFERED IN OVER- NUMBER OF PERCENTAGE OF
SELLING STOCKHOLDER ALLOTMENT OPTION SHARES SHARES
------------------- ---------------- --------- -------------
<S> <C> <C> <C>
Bain Capital Funds (1)..........
Randolph Street Partners (2)....
Robert A. Sandler...............
----------- ---
Total..........................
</TABLE>
- --------
* Represents less than one percent.
(1) The Bain Capital Funds will sell their shares in the over-allotment option
on a pro rata basis.
(2) Certain partners of the law firm of Kirkland & Ellis are partners in
Randolph Street Partners. Kirkland & Ellis provides legal services to the
Company from time to time and is representing the Company and the Selling
Stockholders in connection with this Offering.
The Company has agreed to pay all of the expenses of the Selling
Stockholders in the Offering other than underwriting discounts and
commissions. In the event the Underwriters' over-allotment is not exercised in
full, the number of shares to be sold by each of the Selling Stockholders
named above will be reduced proportionally.
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<PAGE>
CERTAIN TRANSACTIONS
ADVISORY AGREEMENT
On June 28, 1995, the Company entered into an Advisory Agreement with Bain
Capital pursuant to which Bain Capital agreed to provide management
consulting, advisory services and support, negotiation and analysis of
financial alternatives, acquisitions and dispositions and other services
agreed upon by the Company and Bain Capital. Pursuant to the Advisory
Agreement, the Company agreed to pay Bain Capital: (i) a financial advisory
fee of $600,000, plus out-of-pocket expenses of $52,000, at the closing of the
Wesley Jessen Acquisition; (ii) an annual fee of $1.0 million, plus reasonable
out-of-pocket expenses, for ongoing management, consulting and financial
services; and (iii) a transaction fee equal to 1.0% of the amount of any
future financing (whether debt or equity) incurred by the Company or any
subsidiary of the Company in connection with any future acquisition. From June
29, 1995 to October 2, 1996, the Company paid Bain Capital $1.25 million in
financial advisory fees under such agreement. At the time of the Barnes-Hind
Acquisition, the Company and Bain Capital entered into an Amended and Restated
Advisory Agreement (the "Advisory Agreement"), pursuant to which Bain Capital
will provide similar services to the Company and its subsidiaries. In exchange
for such services, Bain will receive: (i) a quarterly management fee of not
more than $500,000, plus reasonable out-of-pocket expenses; and (ii) a
transaction fee in connection with the consummation of each acquisition,
divestiture or financing by the Company or its subsidiaries in an amount equal
to 1.0% of the aggregate value of such transaction. In addition, the Company
paid Bain Capital a fee of approximately $3.0 million, plus its out-of-pocket
expenses, in connection with the structuring of the Bank Credit Agreement used
to finance the Barnes-Hind Acquisition. The Advisory Agreement has an initial
term ending on January 31, 2004, subject to automatic one-year extensions
unless the Company or Bain Capital provides written notice of its desire not
to extend such term. Immediately prior to the consummation of the Offering,
the Company and Bain Capital will terminate the Advisory Agreement and Bain
Capital will receive a final payment thereunder of approximately $10.0 million
in consideration of services rendered to such date and such termination. The
Company believes that the fees paid for the professional services rendered are
at least as favorable to the Company as those which could be negotiated with a
third party.
Prior to the completion of the Offering, the Company expects to enter into a
new advisory agreement with Bain Capital pursuant to which Bain Capital will
agree to provide advisory services in connection with the structuring,
negotiation and financial analysis of any potential acquisitions, dispositions
or other financing transactions (whether debt or equity) of the Company or any
of its subsidiaries in exchange for a transaction fee equal to 1.0% of the
aggregate value of each acquisition, divesture or financing completed by the
Company or any of its subsidiaries during the term of the agreement. The new
advisory agreement will have an initial term ending January 31, 2002 or at
such time as Bain Capital or its affiliates cease to own at least 5.0% of the
outstanding Common Stock. The Company believes that the terms of such
agreement are at least as favorable to the Company as those which could be
negotiated with a third party.
STOCKHOLDERS AGREEMENT
On October 22, 1996, the Company, the Bain Capital Funds, Robert A. Sandler,
a former Director of the Company, Randolph Street Partners and BTIP entered
into a stockholders agreement (the "Stockholders Agreement"). The Stockholders
Agreement (i) provides that BTIP may not sell, transfer or otherwise dispose
of any shares of its Common Stock without the prior written approval of
holders representing a majority of the shares currently held by the Bain
Capital Funds and its related investors (collectively, the "Bain Group"); (ii)
grants BTIP certain participation rights in connection with certain transfers
made by the Bain Group; and (iii) requires BTIP to consent to a sale of the
Company to an independent third party if such sale is approved by holders
representing a majority of the shares held by the Bain Group. In addition, the
Company agreed not to issue any shares of its capital stock at a price per
share below fair market value (as determined in good faith by the Board) other
than: (i) to employees, directors or consultants of the Company or its
subsidiaries (excluding Bain Capital, its employees and its affiliates); (ii)
as consideration (in whole or in part) for an acquisition; (iii) to each of
the Company's then existing stockholders, on a pro rata basis; or (iv) upon
the exercise or conversion of any then outstanding securities or issued
thereafter in accordance with the foregoing provisions. All of the foregoing
provisions of the Stockholders Agreement will terminate upon the consummation
of the Offering.
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<PAGE>
SALES OF COMMON STOCK TO NAMED EXECUTIVES
Effective as of June 28, 1995 and pursuant to the 1995 Stock Plan, the
Company sold shares of its capital stock to certain executive officers of the
Company. Kevin J. Ryan, President and Chief Executive Officer, purchased 7,500
shares of Class L Common and 67,500 shares of Common Stock for an aggregate
amount equal to approximately $135,944.05. All sales to other executive
officers of the Company involved amounts less than $60,000.
INDEMNIFICATION AGREEMENTS
Prior to the completion of the Offering, the Company expects to enter into
agreements to provide indemnification for its Directors and executive officers
in addition to the indemnification provided for in the Company's Restated
Certificate and By-laws of the Company.
DESCRIPTION OF CERTAIN INDEBTEDNESS
BANK CREDIT AGREEMENT
On October 2, 1996, the Company's principal operating subsidiary, Wesley
Jessen Corporation, entered into a Bank Credit Agreement with Bankers Trust
Company, as agent (the "Agent"), providing for Term Loans of $95.0 million in
the form of a multi-tranche facility and a revolving credit facility of $45.0
million. The Company used borrowings under the Bank Credit Agreement to
provide funding necessary to consummate the Barnes-Hind Acquisition, with the
revolving credit facility being used for working capital needs. The Company
intends to use approximately $30.0 million of the net proceeds of the Offering
to repay indebtedness under the Bank Credit Agreement.
The maturity and interest rates of the Term Loans under the Bank Credit
Agreement vary by tranche. See Note 9 to Notes to Consolidated Financial
Statements. The overall effective interest rate for borrowings under the Term
Loans at October 2, 1996 was 8.48%. The revolving credit facility is a 5.5
year facility bearing interest at a floating rate based, at the Company's
option, on either the Eurodollar Rate (as defined therein) plus 275 basis
points or the Bank Base Rate (as defined therein) plus 175 basis points. The
revolving credit facility includes a letter of credit sublimit of $17 million.
The Company is required to pay the lenders under the Bank Credit Agreement in
the aggregate a commitment fee equal to 0.5% per annum, payable on a quarterly
basis, on the daily average unused portion of this facility.
Indebtedness under the Bank Credit Agreement is guaranteed by the Company
and all current and future domestic subsidiaries of the Company, except for
Wesley Jessen Corporation, and is secured by (i) a perfected security interest
in substantially all the assets and property of the Company and its domestic
subsidiaries, and (ii) a first priority perfected pledge of all capital stock
of each direct and indirect domestic subsidiary of the holding company.
The Bank Credit Agreement requires the Company to meet certain financial
tests, including minimum levels of consolidated EBITDA (as defined therein),
minimum interest coverage and maximum leverage ratio. The Bank Credit
Agreement also contains covenants which, among other things, limit the
incurrence of additional indebtedness, dividends, capital expenditures,
transactions with affiliates, asset sales, acquisitions, mergers, prepayments
of other indebtedness, liens and encumbrances and other matters customarily
restricted in such agreements.
The Bank Credit Agreement contains customary events of default, including
payment defaults, breach of representations and warranties, covenant defaults,
cross-defaults to certain other indebtedness, certain events of bankruptcy and
insolvency, ERISA defaults, judgment defaults, failure of any guaranty or
security agreement supporting the Bank Credit Agreement to be in full force
and effect and change of control of the Company.
NEW BANK CREDIT AGREEMENT
Based upon discussions with its principal lender under the Bank Credit
Agreement, the Company expects to refinance the existing Bank Credit Agreement
upon consummation of the Offering. The Company expects that the New Bank
Credit Agreement will provide for borrowings of up to $112.0 million and have
a scheduled maturity in 2003. The Company anticipates that the New Bank Credit
Agreement will be secured by substantially all of the assets of the Company
and will generally contain less restrictive covenants and better pricing terms
than the Bank Credit Agreement. To date, no definitive agreements have been
executed and, as a result, no assurance can be given that the New Bank Credit
Agreement will be executed on such terms or entered into at all.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL MATTERS
At the time of the Offering, the total amount of authorized capital stock of
the Company will consist of 50,000,000 shares of Common Stock, par value $0.01
per share, and 5,000,000 shares of preferred stock, par value $0.01 per share
(the "Serial Preferred Stock"). Upon completion of the Offering,
shares of Common Stock will be issued and outstanding and no shares of Serial
Preferred Stock will be issued and outstanding. As of November 30, 1996, there
were 4,090,582 shares of Common Stock and 321,067 shares of Class L Common
outstanding and were held by 24 and 23 holders of record, respectively. All of
the outstanding shares of Class L Common will be converted into shares of
Common Stock prior to the completion of the Offering. See "The
Reclassification." The discussion herein describes the Company's capital
stock, the Restated Certificate and By-laws as anticipated to be in effect
upon consummation of the Offering. The following summary of certain provisions
of the Company's capital stock describes all material provisions of, but does
not purport to be complete and is subject to, and qualified in its entirety
by, the Restated Certificate and the By-laws, which are included as exhibits
to the Registration Statement of which this Prospectus forms a part and by the
provisions of applicable law.
The Restated Certificate and By-laws will contain certain provisions that
are intended to enhance the likelihood of continuity and stability in the
composition of the Board of Directors and which may have the effect of
delaying, deferring or preventing a future takeover or change in control of
the Company unless such takeover or change in control is approved by the Board
of Directors.
COMMON STOCK
The issued and outstanding shares of Common Stock are, and the shares of
Common Stock being offered by the Company will be upon payment therefor,
validly issued, fully paid and nonassessable. Subject to the prior rights of
the holders of any Serial Preferred Stock, the holders of outstanding shares
of Common Stock are entitled to receive dividends out of assets legally
available therefor at such time and in such amounts as the Board of Directors
may from time to time determine. See "Dividend Policy." The shares of Common
Stock are not convertible and the holders thereof have no preemptive or
subscription rights to purchase any securities of the Company. Upon
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to receive pro rata the assets of the Company which are
legally available for distribution, after payment of all debts and other
liabilities and subject to the prior rights of any holders of Serial Preferred
Stock then outstanding. Each outstanding share of Common Stock is entitled to
one vote on all matters submitted to a vote of stockholders. There is no
cumulative voting.
The Company has applied to have the Common Stock approved for inclusion on
the Nasdaq National Market under the symbol " ."
SERIAL PREFERRED STOCK
The Company's Board of Directors may, without further action by the
Company's stockholders, from time to time, direct the issuance of shares of
Serial Preferred Stock in series and may, at the time of issuance, determine
the rights, preferences and limitations of each series. Satisfaction of any
dividend preferences of outstanding shares of Serial Preferred Stock would
reduce the amount of funds available for the payment of dividends on shares of
Common Stock. Holders of shares of Serial Preferred Stock may be entitled to
receive a preference payment in the event of any liquidation, dissolution or
winding-up of the Company before any payment is made to the holders of shares
of Common Stock. Under certain circumstances, the issuance of shares of Serial
Preferred Stock may render more difficult or tend to discourage a merger,
tender offer or proxy contest, the assumption of control by a holder of a
large block of the Company's securities or the removal of incumbent
management. Upon the affirmative vote of a majority of the total number of
Directors then in office, the Board of Directors of the Company, without
stockholder approval, may issue shares of Serial Preferred Stock with
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<PAGE>
voting and conversion rights which could adversely affect the holders of
shares of Common Stock. Upon consummation of the Offering, there will be no
shares of Serial Preferred Stock outstanding, and the Company has no present
intention to issue any shares of Serial Preferred Stock.
CERTAIN PROVISIONS OF THE RESTATED CERTIFICATE OF INCORPORATION AND BY-LAWS
The Restated Certificate provides for the Board to be divided into three
classes, as nearly equal in number as possible, serving staggered terms.
Approximately one-third of the Board will be elected each year. See
"Management." Under the Delaware General Corporation Law, directors serving on
a classified board can only be removed for cause. The provision for a
classified board could prevent a party who acquires control of a majority of
the outstanding voting stock from obtaining control of the Board until the
second annual stockholders meeting following the date the acquiror obtains the
controlling stock interest. The classified board provision could have the
effect of discouraging a potential acquiror from making a tender offer or
otherwise attempting to obtain control of the Company and could increase the
likelihood that incumbent directors will retain their positions.
The Restated Certificate provides that stockholder action can be taken only
at an annual or special meeting of stockholders and cannot be taken by written
consent in lieu of a meeting. The Restated Certificate and the By-laws provide
that, except as otherwise required by law, special meetings of the
stockholders can only be called pursuant to a resolution adopted by a majority
of the Board of Directors or by the Chief Executive Officer of the Company.
Stockholders will not be permitted to call a special meeting or to require the
Board to call a special meeting.
The By-laws establish an advance notice procedure for stockholder proposals
to be brought before an annual meeting of stockholders of the Company,
including proposed nominations of persons for election to the Board.
Stockholders at an annual meeting may only consider proposals or nominations
specified in the notice of meeting or brought before the meeting by or at the
direction of the Board or by a stockholder who was a stockholder of record on
the record date for the meeting, who is entitled to vote at the meeting and
who has given to the Company's Secretary timely written notice, in proper
form, of the stockholder's intention to bring that business before the
meeting. Although the By-laws do not give the Board the power to approve or
disapprove stockholder nominations of candidates or proposals regarding other
business to be conducted at a special or annual meeting, the By-laws may have
the effect of precluding the conduct of certain business at a meeting if the
proper procedures are not followed or may discourage or defer a potential
acquiror from conducting a solicitation of proxies to elect its own slate of
directors or otherwise attempting to obtain control of the Company.
The Restated Certificate and By-laws provide that the affirmative vote of
holders of at least 80% of the total votes eligible to be cast in the election
of directors is required to amend, alter, change or repeal certain of their
provisions. This requirement of a super-majority vote to approve amendments to
the Restated Certificate and By-laws could enable a minority of the Company's
stockholders to exercise veto power over any such amendments.
CERTAIN PROVISIONS OF DELAWARE LAW
Following the consummation of the Offering, the Company will be subject to
the "Business Combination" provisions of the Delaware General Corporation Law.
In general, such provisions prohibit a publicly held Delaware corporation from
engaging in various "business combination" transactions with any "interested
stockholder" for a period of three years after the date of the transaction
which the person became an "interested stockholder," unless (i) the
transaction is approved by the Board of Directors prior to the date the
"interested stockholder" obtained such status; (ii) upon consummation of the
transaction which resulted in the stockholder becoming an "interested
stockholder," the "interested stockholder," owned at least 85% of the voting
stock of the corporation outstanding at the time the transaction commenced,
excluding for purposes of determining the
77
<PAGE>
number of shares outstanding those shares owned by (a) persons who are
directors and also officers and (b) employee stock plans in which employee
participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer; or
(iii) on or subsequent to such date the "business combination" is approved by
the Board of Directors and authorized at an annual or special meeting of
stockholders by the affirmative vote of at least 66 2/3% of the outstanding
voting stock which is not owned by the "interested stockholder." A "business
combination" is defined to include mergers, asset sales and other transactions
resulting in financial benefit to a stockholder. In general, an "interested
stockholder" is a Person who, together with affiliates and associates, owns
(or within three years, did own) 15% or more of a corporation's voting stock.
The statute could prohibit or delay mergers or other takeover or change in
control attempts with respect to the Company and, accordingly, may discourage
attempts to acquire the Company.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Restated Certificate limits the liability of Directors to the fullest
extent permitted by the Delaware General Corporation Law. In addition, the
Restated Certificate will provide that the Company shall indemnify Directors
and officers of the Company to the fullest extent permitted by such law. The
Company anticipates entering into indemnification agreements with its current
Directors and executive officers prior to the completion of the Offering and
any new Directors or executive officers following such time. In addition, the
Company anticipates that prior to the Offering it will obtain directors' and
officers' insurance.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is .
78
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no market for the Common Stock of the
Company. The Company can make no predictions as to the effect, if any, that
sales of shares or the availability of shares for sale will have on the market
price prevailing from time to time. Nevertheless, sales of significant amounts
of the Common Stock in the public market, or the perception that such sales
may occur, could adversely affect prevailing market prices. See "Risk
Factors--Shares Eligible for Future Sale."
Upon completion of the Offering, the Company expects to have
shares of Common Stock outstanding. In addition, shares of Common Stock
will be issuable upon the exercise of outstanding stock options. Of the shares
outstanding after the Offering, the shares of Common Stock (
shares if the Underwriters' over-allotment is exercised in full) sold in the
Offering will be freely tradeable without restriction under the Securities
Act, except for any such shares which may be acquired by an "affiliate" of the
Company (an "Affiliate"), as that term is defined in Rule 144 promulgated
under the Securities Act ("Rule 144"), which shares will be subject to the
volume limitations and other restrictions of Rule 144 described below. An
aggregate of shares of Common Stock held by existing stockholders
of the Company upon completion of the Offering will be "restricted securities"
(as that phrase is defined in Rule 144) and may not be resold in the absence
of registration under the Securities Act or pursuant to an exemption from such
registration, including among others, the exemptions provided by Rule 144 and
Rule 701 under the Securities Act.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, if a period of at least two years has elapsed
since the later of the date the "restricted securities" were acquired from the
Company or the date they were acquired from an Affiliate, then the holder of
such restricted securities (including an Affiliate) is entitled to sell in the
public market a number of shares within any three-month period that does not
exceed the greater of 1% of the then outstanding shares of the Common Stock
(approximately shares immediately after the Offering) or the average
weekly reported volume of trading of the Common Stock on the Nasdaq National
Market during the four calendar weeks preceding such sale. The holder may only
sell such shares through "brokers' transactions" or in transactions directly
with a "market maker" (as such terms are defined in Rule 144). Sales under
Rule 144 are also subject to certain requirements regarding providing notice
of such sales and the availability of current public information concerning
the Company. Affiliates may sell shares not constituting restricted securities
in accordance with the foregoing volume limitations and other requirements but
without regard to the two-year holding period. Under Rule 144(k), if a period
of at least three years has elapsed between the later of the date restricted
securities were acquired from the Company or the date they were acquired from
an Affiliate, as applicable, a holder of such restricted securities who is not
an Affiliate at the time of the sale and has not been an Affiliate for at
least three months prior to the sale would be entitled to sell the shares in
the public market without regard to the volume limitations and other
restrictions described above. The Commission is currently considering reducing
the two- and three-year holding periods under Rule 144 described above to one
and two years, respectively. Beginning June 28, 1997, approximately
shares of Common Stock will be eligible for sale in the public market pursuant
to Rule 144, subject to the volume limitations and other restrictions
described above.
Rule 701 provides that "restricted securities" issued by the Company in
transactions meeting the conditions set forth in Rule 701 are eligible to be
resold in the public market 90 days after the Company becomes subject to the
reporting requirements of the Exchange Act. In making such sales, Affiliates
must comply with the current public information, volume limitation, manner of
sale and notice provisions of Rule 144 and nonaffiliates must comply with the
manner of sale provision of Rule 144. In general, Rule 701 requires that
offers and sales of an issuer's securities be: (i) made pursuant to a written
compensatory benefit plan or a written contract relating to the compensation
of such issuer's employees, officers, directors or consultants (a copy of
which must be delivered to such person) and (ii) limited in value to a certain
aggregate amount during any 12-month period. Beginning 90 days from the date
of this Prospectus, the Company believes that shares of Common Stock
and shares issuable upon the exercise of outstanding options held by
employees of the Company will be eligible to be sold in the public market
pursuant to Rule 701.
79
<PAGE>
Notwithstanding the foregoing, the Company and its executive officers,
Directors and certain existing stockholders, including all of the Selling
Stockholders, have agreed not to offer, sell, contract to sell or otherwise
dispose of any Common Stock for a period of 180 days after the date of this
Prospectus without the prior written consent of Merrill Lynch, except, in the
case of the Company, for the shares of Common Stock to be issued in connection
with the Offering or pursuant to employee benefit plans existing on the date
of this Prospectus and in the case of the executive officers, Directors and
existing stockholders, for the shares of Common Stock sold in connection with
the Offering (if any), sales or dispositions to the Company, certain permitted
transfers to related parties that agree to be bound by the foregoing
restrictions and certain permitted sales of shares acquired in the open market
following the completion of the Offering.
REGISTRATION AGREEMENT
The Company, the Bain Capital Funds, Randolph Street Partners, Robert A.
Sandler and BTIP have entered into a registration agreement (the "Registration
Agreement"). Under the Registration Agreement, the holders of a majority of
the registerable securities owned by the Bain Capital Funds and related
investors have the right at any time, subject to certain conditions, to
require the Company to register any or all of their shares of Common Stock
under the Securities Act on Form S-1 (a "Long-Form Registration") or on Form
S-2 or Form S-3 (a "Short-Form Registration") each on an unlimited number of
occasions at the Company's expense. The Company is not required, however, to
effect any such Long-Form Registration or Short-Form Registration within six
months after the effective date of a prior demand registration and may
postpone the filing of such registration for up to six months if the holders
of a majority of the registerable securities agree that such a registration
would reasonably be expected to have an adverse effect on any proposal or plan
by the Company or any of its subsidiaries to engage in an acquisition, merger
or similar transaction. In addition, all holders of registerable securities
are entitled to request the inclusion of any shares of Common Stock subject to
the Registration Agreement in any registration statement at the Company's
expense whenever the Company proposes to register any of its securities under
the Securities Act, subject to certain conditions. In connection with all such
registrations, the Company has agreed to indemnify all holders of registerable
securities against certain liabilities, including liabilities under the
Securities Act. Beginning 180 days after the date of the Prospectus, the
holders of an aggregate of shares of Common Stock will have demand
registration rights pursuant to the Registration Agreement.
80
<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in the Purchase Agreement (the
"Purchase Agreement"), the Company has agreed to sell to the Underwriters
named below, for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch"), Alex. Brown & Sons Incorporated, BT Securities Corporation
("BT Securities") and Salomon Brothers Inc are acting as representatives (the
"Representatives"), and each of the Underwriters has severally agreed to
purchase the number of shares set forth opposite its name below. In the
Purchase Agreement, the several Underwriters have agreed, subject to the terms
and conditions set forth therein, to purchase all the shares of Common Stock
offered hereby if any are purchased. In the event of default by an
Underwriter, the Purchase Agreement provides that, in certain circumstances,
purchase commitments of the nondefaulting Underwriters may be increased or the
Purchase Agreement may be terminated.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated .............................................
Alex. Brown & Sons Incorporated ...............................
BT Securities Corporation .....................................
Salomon Brothers Inc ..........................................
-------
Total ....................................................
=======
</TABLE>
The Underwriters propose initially to offer the shares of Common Stock
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and to certain dealers at such price less a
concession not in excess of $ per share. The Underwriters may allow,
and such dealers may reallow, a concession not in excess of $ per share
on sales to certain other dealers. After the Offering, the public offering
price, concession and discount may be changed.
The Selling Stockholders have granted to the Underwriters an option,
exercisable at any time and from time to time during the 30-day period from
the date of this Prospectus, to purchase up to an aggregate of
additional shares of Common Stock at the public offering price set forth on
the cover page of this Prospectus, less the underwriting discount. The
Underwriters may exercise such option to purchase additional shares solely for
the purpose of covering over-allotments, if any, incurred in connection with
the Offering. To the extent such option is exercised, each Underwriter will
become obligated, subject to certain conditions, to purchase approximately the
same percentage of such additional shares as the number set forth next to such
Underwriter's name in the preceding table bears to the total number of shares
in such table.
Prior to this Offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock has been
determined by negotiation between the Company, the Selling Stockholders and
the Representatives. Among the factors considered in determining the public
offering price were the history of, and the prospects for, the Company's
business and the industry in which it competes, an assessment of the Company's
management, its past and present operations, its past and present earnings and
the trend of such earnings, the prospects for earnings of the Company, the
present state of the Company's development, the general condition of the
securities markets at the time of the Offering and the price-earnings ratios
and market price of securities of comparable companies at the time of the
Offering. There can be no assurance that an active trading market will develop
for the Common Stock or that the Common Stock will trade in the public market
subsequent to the Offering at or above the initial public offering price.
81
<PAGE>
The Company, Wesley Jessen Corporation (the Company's principal operating
subsidiary) and the Selling Stockholders have agreed to indemnify the several
Underwriters against certain liabilities, including certain liabilities under
the Securities Act.
The Underwriters have informed the Company that they do not expect to
confirm sales of the Common Stock offered hereby to any accounts over which
they exercise discretionary authority.
At the request of the Company, the Underwriters have reserved up to
shares of Common Stock for sale at the initial public offering price to
certain eligible employees and persons having business relationships with the
Company and its subsidiaries. The number of shares of Common Stock available
to the general public will be reduced to the extent these persons purchase the
reserved shares. Any reserved shares of Common Stock that are not so purchased
by such employees at the closing of the Offering will be offered by the
Underwriters to the general public on the same terms as the other shares in
the Offering.
The Company and its executive officers, Directors and certain existing
stockholders, including all of the Selling Stockholders, have agreed not to
offer, sell, contract to sell or otherwise dispose of any Common Stock for a
period of 180 days after the date of this Prospectus without the prior written
consent of Merrill Lynch, except, in the case of the Company, for the shares
of Common Stock to be issued in connection with the Offering or pursuant to
employee benefit plans existing on the date of this Prospectus and in the case
of the executive officers, Directors and existing stockholders, for the shares
of Common Stock sold in connection with the Offering (if any), sales or
dispositions to the Company, certain permitted transfers to related parties
that agree to be bound by the foregoing restrictions and certain permitted
sales of shares acquired in the open market following the completion of the
Offering.
Under the Rules of Fair Practice of the National Association of Securities
Dealers, Inc. (the "NASD"), no member of the NASD or an affiliate of a member
shall participate in the distribution of a public offering of equity
securities issued by a company if the member and/or its affiliates will
receive 10% or more of the net proceeds of the offering unless such equity
securities are to be distributed to the public at a price which is no higher
than that recommended by a "qualified independent underwriter." The Company
intends to use a portion of the proceeds of the Offering to repay indebtedness
under the Bank Credit Agreement, which will result in Bankers Trust Company,
an affiliate of BT Securities, receiving more than 10% of the net proceeds of
the Offering.
In view of such use of proceeds, the Offering is being conducted in
accordance with the rules of the NASD and Merrill Lynch is acting as a
"qualified independent underwriter" within the meaning of such rules. In
connection therewith, Merrill Lynch has participated in the preparation of the
Registration Statement of which this Prospectus forms a part. It has exercised
its usual standards of "due diligence" with respect thereto and has
recommended the maximum price at which the Common Stock may be offered hereby.
Merrill Lynch will receive no separate fee for its services as qualified
independent underwriter, although the Company has agreed to reimburse its
expenses incurred as a result of such engagement.
BTIP, an affiliate of BT Securities, is the beneficial owner of an aggregate
of 220,582 shares of the Common Stock of the Company and is a limited partner
in Fund IV of the Bain Capital Funds. See "Principal Stockholders." Bankers
Trust Company, an affiliate of BT Securities, is the administrative agent and
a lender under the Bank Credit Agreement and is expected to be the
administrative agent and a lender under the New Bank Credit Agreement. See
"Description of Certain Indebtedness."
EXPERTS
The financial statements of the Company at December 31, 1995 and September
28, 1996 and for the periods from June 29, 1995 through December 31, 1995 and
January 1, 1996 through September 28, 1996 and the financial statements of the
Predecessor at December 31, 1994 and for the period from January 1, 1995
through June 28, 1995 and the years ended December 31, 1993 and 1994 included
in this Prospectus have been so included in reliance upon the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm
as experts in auditing and accounting.
82
<PAGE>
The Barnes-Hind financial statements at March 31, 1995 and 1996 and for the
years ended March 31, 1995 and 1996 included in this Prospectus have been so
included in reliance upon the report of Coopers & Lybrand LLP, independent
accountants given on the authority of said firm as experts in auditing and
accounting.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Kirkland & Ellis, Chicago, Illinois (a partnership which includes
professional corporations). Certain partners of Kirkland & Ellis are partners
in Randolph Street Partners, which owns 24,817 shares of Common Stock and
2,059 shares of Class L Common and is a Selling Stockholder. See "Principal
Stockholders." Certain legal matters will be passed upon for the Underwriters
by Ropes & Gray, Boston, Massachusetts.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement (of which
this Prospectus is a part and which term shall encompass any amendments
thereto) on Form S-1 pursuant to the Securities Act with respect to the Common
Stock being offered in the Offering. This Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto, certain portions of which are omitted as permitted by the
rules and regulations of the Commission. Statements made in this Prospectus as
to the contents of any contract, agreement or other document referred to are
not necessarily complete; with respect to any such contract, agreement or
other document filed as an exhibit to the Registration Statement, reference is
made to the exhibit for a more complete description of the matter involved,
and each such statement shall be deemed qualified in its entirety by such
reference. For further information about the Company and the securities
offered hereby, reference is made to the Registration Statement and to the
financial statements, schedules and exhibits filed as a part thereof.
Upon completion of the Offering, the Company will be subject to the
information requirements of the Exchange Act, and, in accordance therewith,
will file reports and other information with the Commission. The Registration
Statement, the exhibits and schedules forming a part thereof and the reports
and other information filed by the Company with the Commission in accordance
with the Exchange Act may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549 and at the following regional
offices of the Commission: Seven World Trade Center, 13th Floor, New York, New
York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material or any part thereof may also be
obtained by mail from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates or accessed
electronically by means of the Commission's home page on the Internet at
http://www.sec.gov.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements and to make available quarterly
reports containing unaudited summary financial information for the first three
fiscal quarters of each fiscal year.
83
<PAGE>
INDEX TO FINANCIAL STATEMENTS
WESLEY-JESSEN HOLDING, INC.
(TO BE RENAMED WESLEY JESSEN VISION CARE, INC.)
AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants--Company............................... F-2
Report of Independent Accountants--Predecessor........................... F-3
Consolidated Balance Sheets of the Predecessor at December 31, 1994 and
of the Company at December 31, 1995 and September 28, 1996.............. F-4
Consolidated Statements of Operations of the Predecessor for the years
ended December 31, 1993 and 1994 and for the period January 1, 1995
through June 28, 1995 and of the Company for the period June 29, 1995
through December 31, 1995 and for the period from January 1, 1996
through September 28, 1996.............................................. F-5
Consolidated Statements of Cash Flows of the Predecessor for the years
ended December 31, 1993 and 1994 and for the period January 1, 1995
through June 28, 1995 and of the Company for the period June 29, 1995
through December 31, 1995 and for the period from January 1, 1996
through September 28, 1996.............................................. F-6
Consolidated Statements of Changes in Stockholders' Equity (Deficit) of
the Company for the period June 29, 1995 through December 31, 1995 and
for the period from January 1, 1996 through September 28, 1996.......... F-7
Notes to Consolidated Financial Statements............................... F-8
BARNES-HIND
Independent Auditors' Report............................................. F-25
Combined Balance Sheets at March 31, 1995 and 1996....................... F-26
Combined Statements of Operations for the years ended March 31, 1995 and
1996.................................................................... F-27
Combined Statements of Parent Company Investment for the years ended
March 31, 1995 and 1996................................................. F-28
Combined Statements of Cash Flows for the years ended March 31, 1995 and
1996.................................................................... F-29
Notes to Combined Financial Statements................................... F-30
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS--COMPANY
To the Board of Directors and Stockholders of Wesley-Jessen Holding, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of cash flows and of changes in
stockholders' equity (deficit) present fairly, in all material respects, the
financial position of Wesley-Jessen Holding, Inc. (to be renamed Wesley Jessen
Vision Care, Inc.) and its subsidiaries (the "Company") at December 31, 1995
and September 28, 1996, and the results of their operations and their cash
flows for the period from June 29, 1995 (inception) through December 31, 1995
and for the period from January 1, 1996 through September 28, 1996 in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
As discussed in Note 15, on October 2, 1996 the Company acquired the contact
lens business operating under the name Pilkington Barnes Hind Group from
Pilkington plc.
PRICE WATERHOUSE LLP
Chicago, Illinois
December 4, 1996
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS--PREDECESSOR
To the Board of Directors and Stockholders of Wesley-Jessen Holding, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations and of cash flows present fairly, in all
material respects, the financial position of the Wesley-Jessen contact lens
business of Schering-Plough Corporation (predecessor of Wesley-Jessen Holding,
Inc.--see Note 1) (the "Predecessor") at December 31, 1994, and the results of
its operations and its cash flows for each of the two years in the period ended
December 31, 1994 and for the period from January 1, 1995 through June 28, 1995
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of the management of Wesley-Jessen Holding,
Inc. and its subsidiaries; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Chicago, Illinois
September 17, 1996
F-3
<PAGE>
WESLEY-JESSEN HOLDING, INC.
(TO BE RENAMED WESLEY JESSEN VISION CARE, INC.)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------ --------------------------
DECEMBER 31, DECEMBER 31, SEPTEMBER 28,
1994 1995 1996
------------ ------------ -------------
(DOLLARS IN THOUSANDS, EXCEPT SHARE-
RELATED DATA)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............. $ 2,535 $ 2,522 $ 7,836
Accounts receivable--trade, net....... 23,707 19,708 17,245
Other receivables..................... 1,700 1,684 1,264
Inventories........................... 15,036 25,654 14,020
Deferred income taxes................. -- 6,040 6,524
Prepaid expenses...................... 5,982 3,313 4,870
-------- -------- --------
Total current assets................. 48,960 58,921 51,759
-------- -------- --------
Property, plant and equipment, net..... 106,124 893 4,587
Goodwill, net.......................... 19,193 -- --
Patents, licenses, and other intangi-
bles.................................. 15,339 -- --
Other assets........................... 1,813 -- --
Deferred income taxes.................. -- 4,315 4,132
Capitalized financing fees, net........ -- 3,201 2,765
-------- -------- --------
Total assets......................... $191,429 $ 67,330 $ 63,243
======== ======== ========
LIABILITIES, STOCKHOLDERS' EQUITY AND
SCHERING-PLOUGH INVESTMENT
Current liabilities:
Trade accounts payable................ $ 11,039 $ 7,405 $ 3,617
Accrued compensation and benefits..... 4,001 4,295 8,780
Accrued advertising................... -- 3,823 4,753
Other accrued liabilities............. 2,980 9,413 8,373
Income taxes payable.................. -- 1,223 2,504
Current portion of long-term debt..... -- 2,500 2,000
-------- -------- --------
Total current liabilities............ 18,020 28,659 30,027
-------- -------- --------
Negative goodwill, net................. -- 11,361 10,773
Long-term debt, less current maturi-
ties.................................. -- 39,500 26,500
-------- -------- --------
Total liabilities.................... 18,020 79,520 67,300
-------- -------- --------
Commitments and contingencies (Note
14)...................................
Stockholders' equity (deficit):
Class L Common stock, $.01 par value,
redeemable, cumulative yield of
12.5%, 600,000 shares authorized,
429,177 and 321,067 issued and out-
standing at December 31, 1995 and
September 28, 1996, respectively..... -- 4 3
Common stock, $.01 par value,
5,400,000 shares authorized,
3,862,604 and 4,090,582 issued and
outstanding at December 31, 1995 and
September 28, 1996, respectively..... -- 38 40
Additional paid in capital............ -- 7,483 7,754
Accumulated deficit................... -- (19,715) (11,854)
-------- -------- --------
Total stockholders' equity (deficit).. -- (12,190) (4,057)
-------- -------- --------
Schering-Plough investment (Note 8)... 173,409 -- --
-------- -------- --------
Total liabilities, stockholders'
equity (deficit) and Schering-Plough
investment.......................... $191,429 $ 67,330 $ 63,243
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
WESLEY-JESSEN HOLDING, INC.
(TO BE RENAMED WESLEY JESSEN VISION CARE, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------------------- --------------------------
YEARS ENDED JANUARY 1 JUNE 29 JANUARY 1
DECEMBER 31, THROUGH THROUGH THROUGH
-------------------- JUNE 28, DECEMBER 31, SEPTEMBER 28,
1993 1994 1995 1995 1996
--------- --------- --------- ------------ -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales............... $ 103,386 $ 109,640 $ 51,019 $ 54,315 $96,048
--------- --------- -------- -------- -------
Operating costs and ex-
penses:
Cost of goods sold.... 56,780 65,591 20,871 19,916 26,471
Cost of goods sold--
inventory step-up
(Note 5)............ -- -- -- 33,929 6,626
Marketing and adminis-
trative.............. 59,764 79,185 43,236 29,476 51,014
Research and develop-
ment................. 10,286 9,843 4,569 2,524 3,786
Amortization of intan-
gible assets......... 5,472 5,472 2,736 (392) (588)
--------- --------- -------- -------- -------
Income (loss) from oper-
ations................. (28,916) (50,451) (20,393) (31,138) 8,739
Other (income) expense:
Interest expense...... -- -- -- 2,599 2,757
Financing charge (Note
8)................... 6,886 7,172 3,511 -- --
Other income, net..... (256) (202) (1,360) -- (3,500)
--------- --------- -------- -------- -------
Income (loss) before in-
come taxes............. (35,546) (57,421) (22,544) (33,737) 9,482
Income tax (expense)
benefit................ 17,214 26,935 9,401 14,022 (1,621)
--------- --------- -------- -------- -------
Net income (loss)....... $ (18,332) $ (30,486) $(13,143) $(19,715) $ 7,861
========= ========= ======== ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
WESLEY-JESSEN HOLDING, INC.
(TO BE RENAMED WESLEY JESSEN VISION CARE, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
----------------------------- --------------------------
YEARS ENDED
DECEMBER 31,
------------------
JANUARY 1 JUNE 29 JANUARY 1
THROUGH THROUGH THROUGH
JUNE 28, DECEMBER 31, SEPTEMBER 28,
1993 1994 1995 1995 1996
-------- -------- --------- ------------ -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash Flow Provided by (Used in)
Operating Activities:
Net income (loss).............................................. $(18,332) $(30,486) $(13,143) $(19,715) $ 7,861
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation expense........................................... 6,036 7,588 3,871 -- 159
Purchased inventory step-up.................................... -- -- -- 33,929 6,626
Amortization of intangible assets.............................. 5,472 5,472 2,736 -- --
Amortization of capitalized financing fees..................... -- -- -- 291 436
Amortization of negative goodwill.............................. -- -- -- (392) (588)
(Gain) loss on disposal of property, plant and equipment....... (25) 142 6 -- (44)
Changes in balance sheet items:
Accounts receivable............................................ 9,309 9,151 2,430 409 2,463
Other receivables.............................................. 3,505 1,836 455 (343) 420
Inventories.................................................... 3,898 561 (8,857) 4,668 5,008
Deferred income taxes.......................................... -- -- -- (15,245) (301)
Prepaid expenses............................................... 579 (1,803) 1,457 (962) (1,557)
Other assets................................................... 2,086 1,358 (688) -- --
Accounts payable............................................... (1,572) 1,424 (1,388) (1,614) (3,788)
Accrued liabilities............................................ 1,345 (1,907) 3,286 1,786 4,375
Income taxes payable........................................... -- -- -- 1,223 1,281
-------- -------- -------- -------- --------
Cash provided by (used in) operating activities................ 12,301 (6,664) (9,835) 4,035 22,351
Investing Activities:
Net assets acquired (exclusive of cash), including payments
related to financing agreements............................... -- -- -- (50,525) --
Capital expenditures........................................... (25,297) (3,187) (1,959) (893) (3,657)
Proceeds from sale of property, plant and equipment............ 175 916 302 -- (152)
-------- -------- -------- -------- --------
Cash provided by (used in) investment activities............... (25,122) (2,271) (1,657) (51,418) (3,809)
-------- -------- -------- -------- --------
Financing Activities:
Issuance of common stock....................................... -- -- -- 7,525 272
Proceeds from long-term debt................................... -- -- -- 47,000 --
Payments of long-term debt..................................... -- -- -- (5,000) (13,500)
Advances from (payments to) Schering-Plough, net............... 13,994 7,652 11,272 -- --
-------- -------- -------- -------- --------
Cash provided by (used in) financing activities................ 13,994 7,652 11,272 49,525 (13,228)
-------- -------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents........... 1,173 (1,283) (220) 2,142 5,314
Cash and Cash Equivalents:
Beginning of period............................................ 2,645 3,818 2,535 380 2,522
-------- -------- -------- -------- --------
End of period.................................................. $ 3,818 $ 2,535 $ 2,315 $ 2,522 $ 7,836
======== ======== ======== ======== ========
Supplemental Disclosure of Cash
Flow Information:
Cash paid during the period for interest (Note 8).............. $ -- $ -- $ -- $ 1,400 $ 2,811
======== ======== ======== ======== ========
Cash paid during the
period for taxes (Note 2)..................................... $ -- $ -- $ -- $ -- $ 641
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
WESLEY-JESSEN HOLDING, INC.
(TO BE RENAMED WESLEY JESSEN VISION CARE, INC.)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)--COMPANY
<TABLE>
<CAPTION>
CLASS L
COMMON STOCK COMMON STOCK ADDITIONAL TOTAL
---------------- ---------------- PAID IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT EQUITY (DEFICIT)
-------- ------ --------- ------ ---------- ----------- ----------------
(DOLLARS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 29,
1995................... -- $-- -- $-- $ -- $ -- $ --
Issuance of common
stock.................. 429,177 4 3,862,604 39 7,739 -- 7,782
Stock subscription re-
ceivable............... -- -- -- (1) (256) -- (257)
Net loss................ -- -- -- -- -- (19,715) (19,715)
-------- ---- --------- ---- ------ -------- --------
Balance at December 31,
1995................... 429,177 4 3,862,604 38 7,483 (19,715) (12,190)
Issuance of common
stock.................. 823 -- 7,396 -- 15 -- 15
Stock subscription
received............... -- -- -- 1 256 -- 257
Net income.............. -- -- -- -- -- 7,861 7,861
Exchange of common stock
(Note 10).............. (108,933) (1) 220,582 1 -- -- --
-------- ---- --------- ---- ------ -------- --------
Balance at September 28,
1996................... 321,067 $ 3 4,090,582 $ 40 $7,754 $(11,854) $ (4,057)
======== ==== ========= ==== ====== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
WESLEY-JESSEN HOLDING, INC.
(TO BE RENAMED WESLEY JESSEN VISION CARE, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
Effective June 29, 1995, Wesley-Jessen Corporation (the "Buyer"), a wholly
owned subsidiary of Wesley-Jessen Holding, Inc. (the "Company"), completed the
acquisition (the "Wesley Jessen Acquisition") of the Wesley-Jessen contact
lens business (hereinafter referred to as the "Predecessor") of Schering-
Plough Corporation ("Schering-Plough"). The Buyer acquired certain assets from
Schering-Plough, consisting of manufacturing facilities in Des Plaines,
Illinois and Cidra, Puerto Rico, a distribution facility in Chicago, Illinois,
and a number of non-U.S. sales and service offices, assumed certain
liabilities of the Predecessor, and paid certain acquisition costs directly
attributable to the Wesley Jessen Acquisition.
Wesley-Jessen Holding, Inc. is to be renamed Wesley Jessen Vision Care, Inc.
The Company's primary business activity is the research, development,
manufacture, marketing and sale of conventional and disposable soft contact
lenses in the United States and certain other countries. The Company is
headquartered in Des Plaines, Illinois and operates in one business segment.
The consolidated financial statements of the Company include the accounts of
its wholly owned U.S. subsidiary, Wesley Jessen Corporation, and its other
wholly owned subsidiaries which are located in Canada, the United Kingdom,
Italy, Spain, France, Japan, and Puerto Rico.
The consolidated financial statements of the Predecessor present the "carve-
out" financial position, results of operations, and cash flows for the periods
presented for the operations of the contact lens business of Schering-Plough
purchased by the Company. The financial information of the Predecessor
presented herein does not necessarily reflect what the financial position,
results of operations and cash flows of the Wesley Jessen contact lens
business would have been had it operated as a stand-alone entity during the
periods covered and may not be indicative of future financial position,
results of operations or cash flows.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies is presented to assist the
reader in understanding and evaluating the accompanying financial statements.
These policies are in conformity with generally accepted accounting
principles, have been consistently applied unless otherwise noted, and apply
to both the Company and the Predecessor unless otherwise noted.
Use of estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
period. Actual results could differ from those estimates.
Principles of consolidation
The consolidated financial statements include all of the Company's wholly
owned subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation.
Earnings per share
Given the changes in the Company's capital structure to be effected in
conjunction with the anticipated initial public offering, and the Barnes-Hind
Acquisition described in Note 15, historical income (loss) per common share
amounts are not presented in the consolidated financial statements as they are
not considered to be meaningful.
F-8
<PAGE>
WESLEY-JESSEN HOLDING, INC.
(TO BE RENAMED WESLEY JESSEN VISION CARE, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Revenue recognition
Revenues are recognized when product is shipped. Net sales include estimates
for returns and allowances. The Company grants credit terms to its customers
consistent with normal industry practices and does not require collateral. No
individual customer accounts for more than 10 percent of sales.
Other income
Other income for the period from January 1, 1996 through September 28, 1996
includes income of $3.5 million relating to licensing of a patent by the
Company in May 1996.
Cash and cash equivalents
All highly liquid investments with an original maturity of three months or
less are considered to be cash equivalents. These amounts are stated at cost
which approximates fair value.
Inventories
Inventories are stated at lower of cost, determined by the first-in, first-
out (FIFO) method, or market (also see Notes 3 and 5). Market for raw
materials is based on replacement costs and for other inventory
classifications on net realizable value. Consideration is given to
deterioration, obsolescence and other factors in evaluating net realizable
value.
Prepaid expenses
Prepaid expenses include sample inventory to be used for promotional
purposes. The value of samples is charged to promotional expense during the
period in which the samples are shipped.
Property, plant and equipment
Property, plant and equipment is recorded at cost. Depreciation is
determined using the straight-line method over the estimated useful lives of
the assets, which are as follows (in years):
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
----------- -------
<S> <C> <C>
Buildings and land improvements............................. 20 to 50 25
Machinery and equipment..................................... 10 to 15 7
Furniture and fixtures...................................... 8 to 12 7
Automobiles................................................. 4 3
</TABLE>
Expenditures for renewals and betterments are capitalized, and maintenance
and repairs are charged to operations.
Negative goodwill/goodwill
Negative goodwill of the Company arose at the time of the Wesley Jessen
Acquisition since the fair value of net assets acquired significantly exceeded
total acquisition cost, resulting in a writedown of the Company's property,
plant and equipment balances and other noncurrent assets to zero with the
residual amount of $11.8 million being allocated to negative goodwill. This
amount is being amortized on a straight-line basis as a credit to income over
a period of fifteen years. Negative goodwill was $11.4 million and $10.8
million, net of $0.4 million and $1.0 million of accumulated amortization, at
December 31, 1995 and September 28, 1996, respectively.
F-9
<PAGE>
WESLEY-JESSEN HOLDING, INC.
(TO BE RENAMED WESLEY JESSEN VISION CARE, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Goodwill of the Predecessor represents primarily the excess of cost over the
fair value of acquired net assets allocated to the Predecessor arising from
Schering-Plough's 1981 acquisition of the Predecessor, and was being amortized
on a straight-line basis over 40 years. At December 31, 1994, goodwill was
$19.2 million, net of accumulated amortization of $7.7 million.
The Predecessor's goodwill and other intangible assets (further discussed
below) relate primarily to the Company's conventional soft contact lens
business. Based on the relatively stable operations and positive operating
cash flows of this line of business, the pre-Wesley Jessen Acquisition
carrying values of the Predecessor's goodwill and other intangible assets were
not considered to be impaired.
Intangible assets other than goodwill
Intangible assets of the Predecessor include purchased licenses, patents,
and other intangible assets which were amortized on a straight-line basis over
their expected useful lives. Licenses and patents, net of accumulated
amortization of $8.0 million and $20.2 million, respectively, aggregated $7.9
million and $2.8 million at December 31, 1994, respectively. Other intangible
assets aggregated $4.6 million at December 31, 1994, net of accumulated
amortization of $1.4 million. In connection with the purchase accounting
applied to the Wesley Jessen Acquisition (Note 3), intangible assets acquired
were written down to zero at the date of Wesley Jessen Acquisition.
Capitalized financing fees
Capitalized financing fees of the Company are amortized over the term of the
underlying debt utilizing the interest method and the amortization is included
in interest expense.
Research and development costs
Expenditures related to the development of new products and processes,
including significant improvements and refinements of existing products, are
expensed as incurred.
Foreign currency translation
The functional currency of each of the Company's and the Predecessor's
foreign subsidiaries is the local currency in its respective country. Asset
and liability accounts of each entity are translated at the exchange rate in
effect at each period-end, and income and expense accounts are translated at
average exchange rates prevailing during the period. Gains and losses
resulting from the translation of these foreign currency financial statements
are included in stockholders' equity (deficit). Foreign currency translation
gains and losses of the Predecessor and the Company were not significant in
the periods presented and have not been presented separately.
F-10
<PAGE>
WESLEY-JESSEN HOLDING, INC.
(TO BE RENAMED WESLEY JESSEN VISION CARE, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Income taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes, which is
an asset and liability method of accounting for income taxes. Under this
method, deferred tax assets and liabilities are recognized for the expected
future tax consequences, utilizing currently enacted tax rates, of temporary
differences between the carrying amounts and the tax bases of assets and
liabilities. Deferred tax assets are recognized, net of any necessary
valuation allowance, for the estimated future tax effects of deductible
temporary differences and tax operating loss and credit carryforwards.
Deferred tax expense or benefit represents the change in the deferred tax
asset or liability balances.
The Predecessor's operations were included in Schering-Plough's consolidated
U.S. federal tax returns. The provision for income taxes shown in the
Consolidated Statements of Operations has been determined as if the
Predecessor had filed separate tax returns for the periods presented; all U.S.
income taxes, including deferred taxes, were settled with Schering-Plough on a
current basis through the Schering-Plough investment account, and Schering-
Plough utilized the tax losses generated by the Predecessor. The income tax
attributes of the Predecessor did not survive the Wesley Jessen Acquisition.
Concentration of credit risk
The Company provides credit, in the normal course of business, to
distributors, optical store chains and physicians' offices. The Company
performs ongoing credit evaluations of its customers and maintains reserves
for potential credit losses which, when realized, have been within the range
of management's allowance for doubtful accounts.
Fair value of financial instruments
Cash, accounts receivable, accounts payable, and accrued liabilities are
reflected in the financial statements at amounts which approximate fair value,
primarily because of the short-term maturity of those instruments. The Company
believes that due to the adjustable interest rates applicable to its long-term
debt, the fair value approximates the carrying value of the obligations.
Interim results
The interim results of operations are not necessarily indicative of results
to be expected for a full year.
3. WESLEY JESSEN ACQUISITION
The Wesley Jessen Acquisition has been accounted for using the purchase
method of accounting. Accordingly, the purchase price has been allocated to
the assets purchased and the liabilities assumed based upon the estimated fair
values at the date of the Wesley Jessen Acquisition.
A summary of assets acquired, liabilities assumed, and purchase price paid
is as follows (dollars in millions):
<TABLE>
<S> <C>
Consideration:
Cash.................................................................... $47.0
Liabilities assumed..................................................... 29.6
-----
Cost of assets acquired................................................... $76.6
=====
</TABLE>
F-11
<PAGE>
WESLEY-JESSEN HOLDING, INC.
(TO BE RENAMED WESLEY JESSEN VISION CARE, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The final cost allocated to each of the Company's assets and liabilities at
the date of the Wesley Jessen Acquisition, as determined in accordance with
the purchase method of accounting, is presented in the table below (dollars in
millions). The estimated fair values allocated to acquired property, plant and
equipment, noncurrent intangible assets, and other noncurrent assets were
$103.9 million, $31.8 million, and $2.5 million, respectively. Since the
estimated fair values of the net assets acquired exceeded total acquisition
cost, the excess of net assets acquired over the purchase price was allocated
as a reduction to the Company's fixed assets, noncurrent intangible assets,
and other noncurrent assets, with the residual discount of $11.8 million being
allocated to negative goodwill.
<TABLE>
<S> <C> <C>
Accounts receivable................................................ $ 20.1
Inventories........................................................ 64.3
Prepaid expenses and other current assets.......................... 4.0
Property, plant, and equipment..................................... --
Noncurrent intangible assets....................................... --
Other noncurrent assets............................................ --
Accounts payable and accrued liabilities........................... (24.7)
Deferred income tax liabilities.................................... (4.9)
Negative goodwill.................................................. (11.8)
------
Net assets acquired.............................................. $ 47.0
======
</TABLE>
The Wesley Jessen Acquisition was financed by $43.0 million of bank debt and
$7.5 million of proceeds from the issuance of the Company's common stock; the
Company incurred and capitalized financing fees of $3.5 million.
4. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following (in millions):
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------ --------------------------
DECEMBER 31, DECEMBER 31, SEPTEMBER 28,
1994 1995 1996
------------ ------------ -------------
<S> <C> <C> <C>
Trade receivables....................... $ 44.7 $31.6 $28.9
Less allowances:
Doubtful accounts..................... (5.2) (4.7) (3.4)
Sales returns and adjustments......... (15.8) (7.2) (8.3)
------ ----- -----
Net receivables......................... $ 23.7 $19.7 $17.2
====== ===== =====
</TABLE>
5. INVENTORIES
Inventories consist of the following (in millions):
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------ --------------------------
DECEMBER 31, DECEMBER 31, SEPTEMBER 28,
1994 1995 1996
------------ ------------ -------------
<S> <C> <C> <C>
Raw materials........................... $ 0.7 $ 3.2 $ 3.4
Work-in-process......................... 0.7 2.1 3.4
Finished goods.......................... 13.6 20.4 7.2
----- ----- -----
$15.0 $25.7 $14.0
===== ===== =====
</TABLE>
F-12
<PAGE>
WESLEY-JESSEN HOLDING, INC.
(TO BE RENAMED WESLEY JESSEN VISION CARE, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In connection with the Wesley Jessen Acquisition, under the purchase method
of accounting, the Company's total inventories were written up by $40.6
million to fair value at the date of the Acquisition. Of this amount, $34.0
million and $6.6 million was charged to cost of goods sold during the periods
June 29, 1995 through December 31, 1995, and January 1, 1996 through September
28, 1996, respectively.
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following (in millions):
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------ --------------------------
DECEMBER 31, DECEMBER 31, SEPTEMBER 28,
1994 1995 1996
------------ ------------ -------------
<S> <C> <C> <C>
Land................................... $ 4.8 $ -- $--
Buildings and land improvements........ 49.9 -- 0.7
Machinery, equipment, furniture and
fixtures.............................. 77.8 -- 1.7
Construction-in-progress............... 4.4 0.9 2.4
------ ----- ----
136.9 0.9 4.8
Less accumulated depreciation.......... (30.8) -- (0.2)
------ ----- ----
Net property, plant, and equipment..... $106.1 $ 0.9 $4.6
====== ===== ====
</TABLE>
Expenditures for maintenance and repairs were $2.6 million, $4.6 million,
$1.9 million, $1.7 million and $1.7 million for the years ended December 31,
1993 and 1994, the period from January 1, 1995 through June 28, 1995, the
period from June 29, 1995 through December 31, 1995 and the period from
January 1, 1996 through September 28, 1996.
7. ADVERTISING COSTS
The Predecessor and the Company participate in several cooperative
advertising programs with customers. The costs incurred under these programs
are accrued and expensed at the inception of the contract. All of the
Predecessor's and the Company's other production costs of advertising are
expensed the first time the advertising takes place. Advertising expense for
the years ended December 31, 1993 and 1994, for the period from January 1,
1995 through June 28, 1995, for the period from June 29, 1995 through December
31, 1995 and for the period from January 1, 1996 through September 28, 1996
was $5.8 million, $13.7 million, $8.8 million, $5.8 million and $8.7 million,
respectively.
8. RELATED PARTY TRANSACTIONS
Predecessor parent company
Schering-Plough provided the Predecessor certain legal, audit, data
processing, engineering, insurance, facility, regulatory, and administrative
services. Charges to the Predecessor for these services are reflected in the
Consolidated Statements of Operations through June 28, 1995 and were based on
allocations of Schering-Plough's actual direct and indirect costs using
varying allocation bases as appropriate (hours worked, headcount, etc.)
designed to estimate the actual cost incurred by Schering-Plough to render
these services to the Predecessor. Management believes that the basis used for
allocating such services is reasonable, and the allocation process was
consistent with the methodology used by Schering-Plough to allocate the cost
of similar services provided to its other business units. No provision has
been made for possible incremental expenses that would have been
F-13
<PAGE>
WESLEY-JESSEN HOLDING, INC.
(TO BE RENAMED WESLEY JESSEN VISION CARE, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
incurred or hypothetical savings achieved had the Predecessor operated as an
independent entity. These charges are included in marketing and administrative
expenses and are summarized as follows (in millions):
<TABLE>
<CAPTION>
PREDECESSOR
-------------------------------
YEAR ENDED FOR THE PERIOD
DECEMBER 31, JANUARY 1, 1995
------------- THROUGH JUNE 28,
1993 1994 1995
------ ------ -----------------
<S> <C> <C> <C>
Allocations:
General and administrative.................... $ 1.9 $ 1.9 $1.1
Legal......................................... 2.1 2.1 0.8
Compensation and benefits..................... 0.7 0.5 0.1
Direct charges:
Insurance..................................... 2.5 3.2 1.8
------ ------ ----
$ 7.2 $ 7.7 $3.8
====== ====== ====
</TABLE>
The Predecessor's consolidated statements of operations also include a
financing charge from Schering-Plough based upon 11% of receivables
outstanding and inventories on-hand throughout the period. This charge
amounted to $6.9 million, $7.2 million, and $3.5 million for the years ended
December 31, 1993 and 1994, and the period from January 1, 1995 through June
28, 1995, respectively.
A summary of changes in Schering-Plough's investment is as follows (in
thousands):
<TABLE>
<S> <C>
Excess of assets over liabilities at December 31, 1992................ $200,581
1993 net loss......................................................... (18,332)
Net change in amounts due to/from Schering-Plough..................... 13,994
--------
Excess of assets over liabilities at December 31, 1993................ 196,243
1994 net loss......................................................... (30,486)
Net change in amounts due to/from Schering-Plough..................... 7,652
--------
Excess of assets over liabilities at December 31, 1994................ 173,409
Net loss from January 1, 1995 through June 28, 1995................... (13,143)
Net change in amounts due to/from Schering-Plough..................... 11,272
--------
Excess of assets over liabilities at June 28, 1995.................... $171,538
========
</TABLE>
Management and advisory fees--Company
In connection with the Wesley Jessen Acquisition, the Company entered into
an agreement with Bain Capital, Inc., an affiliate of the Company's major
stockholder, for the provision of management and advisory services. Included
in marketing and administrative expense during the period from June 29, 1995
through December 31, 1995 and January 1, 1996 through September 28, 1996, are
$500,000 and $750,000, respectively, of management fees paid for the services
provided pursuant to this agreement. In addition, if the Company enters into
any acquisition transactions, it must pay specified fees to Bain Capital, Inc.
based upon the purchase price. The Company paid Bain Capital, Inc. a fee of
$652,000 for services provided in structuring the Wesley Jessen Acquisition.
9. LONG-TERM DEBT
On June 28, 1995, the Company entered into a $55 million credit agreement,
consisting of a $30 million term loan payable in 23 quarterly installments,
commencing December 31, 1995, and a $25 million revolving credit note, both of
which are due June 30, 2001. Interest on the term loan is computed on a
floating rate based on LIBOR while the revolver is based on a fixed rate. At
December 31, 1995 and September 28, 1996, the Company's weighted average
borrowing rate was 9.3% and 8.7%, respectively.
At September 28, 1996, the entire amount of the revolving credit note was
unused. The Company is liable for commitment fees ranging from 0.375% to 0.50%
per annum on the daily unutilized portion of the revolving credit note.
F-14
<PAGE>
WESLEY-JESSEN HOLDING, INC.
(TO BE RENAMED WESLEY JESSEN VISION CARE, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The credit agreement contains a number of covenants, including among others,
covenants restricting the Company and its subsidiaries with respect to the
incurrence of indebtedness, declaration or payment of dividends or other
distributions in excess of prescribed levels, creation of liens, and the
making of certain investments or loans. The Company and its subsidiaries are
also required to comply with certain financial tests and maintain certain
financial ratios including maintaining prescribed minimum levels of net worth
and leverage ratios. The revolving credit note is secured by approximately 70%
of domestic accounts receivable and 60% of domestic raw material and finished
goods inventories, as defined in the credit agreement.
Refinancing
On October 2, 1996, in connection with the Barnes-Hind Acquisition described
in Note 15, the Company replaced its long-term borrowing arrangement with the
following new credit facilities:
$45 million revolving credit facility due February 28, 2002
$45 million Term Loan A due February 28, 2002
$50 million Term Loan B due February 29, 2004
In connection with the refinancing, the Company recognized an extraordinary
loss in October 1996 of $2.8 million, primarily relating to the write-off of
capitalized financing fees. Additionally, the Company incurred and capitalized
financing fees of approximately $7.8 million which are being amortized over
the term of the new credit facilities.
Amounts borrowed under the credit facilities bear interest, at the Company's
option, at either the Base Rate (higher of (i) 0.5% in excess of the Federal
Reserve reported adjusted certificate of deposit rate and (ii) the lender's
prime lending rate) plus a margin of 1.75% to 2.25%, or the Eurodollar Rate as
determined by the lenders plus a margin of 2.75% to 3.25%. At October 2, 1996,
the applicable borrowing rates were as follows: Term Loan A 8.22%; Term Loan B
8.72%; and revolving credit facility 10%. Additionally, the Company is
required to pay a commitment fee of 0.5% of the unutilized commitments under
the revolving credit facility; the unutilized portion at October 2, 1996 was
$43.4 million. The credit facilities are guaranteed by the Company and secured
by the capital stock and substantially all assets and property of all its
direct and indirect domestic subsidiaries.
The term loans are repayable as follows (in thousands):
<TABLE>
<S> <C>
1996.............................................................. $ 125
1997.............................................................. 1,500
1998.............................................................. 6,000
1999.............................................................. 10,500
2000.............................................................. 10,500
2001.............................................................. 13,500
2002.............................................................. 17,625
2003.............................................................. 25,625
2004.............................................................. 9,625
-------
$95,000
=======
</TABLE>
The credit facilities contain certain change of control provisions and
impose certain restrictive covenants upon the Company related to the
incurrence of indebtedness, transactions with affiliates, business
combinations, investments, purchases and asset sales, payments of dividends,
and attainment of financial covenants including interest coverage, earnings
and leverage ratios.
10. STOCKHOLDERS' EQUITY (DEFICIT)
Common stock
The Company's authorized capital stock consists of 600,000 shares of Class L
Common Stock, par value $.01 per share ("Class L Common"), and 5,400,000
shares of Common Stock, par value $.01 per share ("Common
F-15
<PAGE>
WESLEY-JESSEN HOLDING, INC.
(TO BE RENAMED WESLEY JESSEN VISION CARE, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Stock ). Concurrent with the Wesley Jessen Acquisition, the Company issued
415,000 shares of Class L Common (issued at $17.41 per share) and 3,735,000
shares of Common Stock (issued at $0.081 per share).
Holders of Class L Common and Common Stock are entitled to one vote per
share on all matters to be voted on by the Company's stockholders, and the
holders of both classes of stock vote together as a single class. The
outstanding shares of one class of stock cannot be the subject of a stock
split or a stock dividend unless the outstanding shares of the other class are
similarly affected.
Holders of Class L Common are entitled to a preferential payment ("Yield")
in the amount of 12.5% per year on the original cost paid for the shares
($17.41 per share) plus any accumulated and unpaid Yield thereon. The Yield
accumulates until such time as distributions are made by the Company as
described in the following paragraph. No distributions were made by the
Company during the periods ended December 31, 1995 and September 28, 1996, and
the accumulated and unpaid Yield at December 31, 1995 and September 28, 1996,
amounted to $475,000 and $1,245,000, respectively.
Holders of Class L Common and Common Stock are entitled to distributions
(whether by dividend, liquidating distribution or otherwise) made by the
Company to stockholders (whether in cash, property or securities of the
Company) in the following priority:
1. Any unpaid Yield on the Class L Common;
2. Original cost of Class L Common, less any amounts previously returned;
and
3. Any remaining portion of the distribution, ratably among the holders of
the Common Stock.
Concurrent with the Wesley Jessen Acquisition, the Company issued 14,034
shares of Class L Common at $17.41 per share and 126,318 shares of Common
Stock at $0.081 per share to certain management employees. Consideration for
these shares approximates fair market value at the date of the Acquisition. In
December 1995, the Company issued 143 shares of Class L Common at $17.41 per
share and 1,286 shares of Common Stock at $0.081 per share to a new management
employee. Stock subscriptions receivable in the amount of $257,000 are
reflected as a reduction of stockholders' equity at December 31, 1995; these
stock subscriptions were received during the period from January 1, 1996
through September 28, 1996.
During the period from January 1, 1996 through September 28, 1996, the
Company issued 823 Class L Common Shares at $17.41 per share and 7,396 Common
Shares at $0.081 per share to certain new management employees. Additionally,
the Company granted 49,281 options to these new management employees at option
prices ranging from $0.081 to $7.33 per share. Certain of the December 1995
and the 1996 option grants and stock purchases were at prices below the
corresponding estimated fair market values, and the Company recognized the
related compensation expense.
In October 1996, 108,933 shares of Class L Common were exchanged for 220,582
shares of Common Stock by the Company; retroactive effect has been given to
this transaction as of September 28, 1996.
Stock options
The Board of Directors has authorized grants of non-qualified stock options
to certain members of the Company's management for up to an aggregate of
700,000 shares of Common Stock pursuant to the 1995 Stock Purchase and Option
Plan. The stock option grants are of two types: time options and target
options. All options expire in 10 years and include certain repurchase and
participation rights which cease upon (1) a sale of the Company or (2) sale of
its common shares by the Company pursuant to a Registration Statement under
the Securities Act of 1933 in connection with which Bain Capital, Inc. and
affiliated investors cease to own at least 20% of the Company.
Time option grants vest in four equal annual installments beginning on June
28, 1996. In certain circumstances, including (1) a sale of the Company or (2)
sale of its common shares by the Company pursuant to a Registration Statement
under the Securities Act of 1933 in connection with which Bain Capital, Inc.
and affiliated investors cease to own at least 20% of the Company, all time
option grants vest immediately. Options are granted at the fair market value
of the Common Stock on the date of grant. All time option grants (250,000
shares) remained outstanding at September 28, 1996, and 62,500 have vested.
F-16
<PAGE>
WESLEY-JESSEN HOLDING, INC.
(TO BE RENAMED WESLEY JESSEN VISION CARE, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Target option grants are exercisable immediately and were granted at prices
that were in excess of fair market value of the common stock on the date of
grant (225,000 shares at $3.70 and 225,000 at $7.33). At September 28, 1996,
all target option grants (450,000 shares) remained outstanding.
The table below summarizes the Company's stock option activity :
<TABLE>
<CAPTION>
OPTION
NUMBER OF PRICE PER
COMMON SHARES COMMON SHARE
------------- ------------
<S> <C> <C>
Balance, June 29, 1995............................... -- --
Granted............................................ 650,719 $.081-7.33
Canceled........................................... -- --
Exercised.......................................... -- --
------- ----------
Balance, December 31, 1995........................... 650,719 .081-7.33
Granted............................................ 49,281 .081-7.33
Canceled........................................... -- --
Exercised.......................................... -- --
------- ----------
Balance, September 28, 1996.......................... 700,000 $.081-7.33
======= ==========
</TABLE>
As permitted, the Company applies Accounting Principles Board Opinion 25 and
related Interpretations in accounting for its stock-based compensation plan.
Had compensation cost for the Company's stock-based compensation plan been
determined based on the fair value at the grant dates for awards under the
plan consistent with the alternative method of Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation, the
effect on the Company's net income (loss) for the periods ended December 31,
1995 and September 28, 1996 would not have been significant.
In October 1996, pursuant to the 1996 Stock Option Plan, the Board of
Directors authorized and granted options to purchase an aggregate of 135,502
shares of Common Stock at an exercise price of $22.67 per share, which
approximates fair market value at the date of grant. Options to purchase an
aggregate of 85,502 shares were immediately exercisable, and options to
purchase 50,000 shares vest in equal installments over a five-year period
beginning on October 22, 1997.
11. INCOME TAXES
Income (loss) before income tax (expense) benefit is as follows (in
thousands):
<TABLE>
<CAPTION>
PREDECESSOR
---------------------------------------
YEAR ENDED
------------------------- JANUARY 1,
DECEMBER 31, DECEMBER 31, THROUGH
1993 1994 JUNE 28, 1995
------------ ------------ -------------
<S> <C> <C> <C>
Domestic (including Puerto Rico)........ $(33,153) $(54,031) $(17,936)
International........................... (2,393) (3,390) (4,608)
-------- -------- --------
Loss before income tax benefit.......... $(35,546) $(57,421) $(22,544)
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
COMPANY
--------------------------
JUNE 29 JANUARY 1
THROUGH THROUGH
DECEMBER 31, SEPTEMBER 28,
1995 1996
------------ -------------
<S> <C> <C>
Domestic (including Puerto Rico)..................... $(33,469) $10,258
International........................................ (268) (776)
-------- -------
Income (loss) before income tax (expense) benefit.... $(33,737) $ 9,482
======== =======
</TABLE>
F-17
<PAGE>
WESLEY-JESSEN HOLDING, INC.
(TO BE RENAMED WESLEY JESSEN VISION CARE, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Income tax (expense) benefit is as follows (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR
---------------------------------------
YEAR ENDED
------------------------- JANUARY 1
DECEMBER 31, DECEMBER 31, THROUGH
1993 1994 JUNE 28, 1995
------------ ------------ -------------
<S> <C> <C> <C>
Current income tax benefit:
Domestic federal..................... $12,023 $19,185 $6,338
Domestic state and local (including
Puerto Rico)........................ 5,191 7,750 3,063
International........................ -- -- --
------- ------- ------
$17,214 $26,935 $9,401
======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
COMPANY
----------------------------
JUNE 29 JANUARY 1
THROUGH THROUGH
DECEMBER 31, SEPTEMBER 28,
1995 1996
------------- --------------
<S> <C> <C>
Current income tax (expense) benefit:
Domestic federal................................ $ (872) $(1,115)
Domestic state and local (including Puerto Ri-
co)............................................ (287) (238)
International................................... (64) (662)
------- -------
$(1,223) $(2,015)
------- -------
Deferred income tax (expense) benefit:
Domestic federal................................ 13,045 1,373
Domestic state and local (including Puerto Ri-
co)............................................ 2,228 (979)
International................................... (28) --
------- -------
15,245 394
------- -------
$14,022 $(1,621)
======= =======
</TABLE>
No allocation of the Predecessor's income tax benefits between current and
deferred amounts has been made as all U.S. income taxes, including deferred
taxes, were settled with Schering-Plough on a current basis through the
Schering-Plough investment account. Schering-Plough utilized in full the tax
losses generated by the Predecessor. The income tax attributes of the
Predecessor did not survive the Acquisition.
Differences between the U.S. federal income tax statutory rates applicable
to the Predecessor and the Company, respectively, and the income tax (expense)
benefit recorded are attributable to the following:
<TABLE>
<CAPTION>
PREDECESSOR
-----------------------------------
YEAR ENDED JANUARY 1
------------------------- THROUGH
DECEMBER 31, DECEMBER 31, JUNE 28,
1993 1994 1995
------------ ------------ ---------
<S> <C> <C> <C>
Income tax statutory rate.................. 35.0% 35.0% 35.0%
State taxes (including Puerto Rico), net of
federal tax benefit....................... 14.6 13.5 13.6
Effect of international operations......... (2.4) (2.1) (7.2)
Other factors.............................. 1.2 0.5 0.3
---- ---- ----
Income tax benefit......................... 48.4% 46.9% 41.7%
==== ==== ====
</TABLE>
F-18
<PAGE>
WESLEY-JESSEN HOLDING, INC.
(TO BE RENAMED WESLEY JESSEN VISION CARE, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
COMPANY
--------------------------
JUNE 29 JANUARY 1
THROUGH THROUGH
DECEMBER 31, SEPTEMBER 28,
1995 1996
------------ -------------
<S> <C> <C>
Income tax statutory rate........................... 34.0% (34.0)%
State taxes (including Puerto Rico), net of federal
tax benefit........................................ 8.4 17.8
Effect of international operations.................. (0.5) (2.8)
Amortization of negative goodwill................... 0.2 1.6
Other factors....................................... (0.5) 0.3
---- -----
Income tax (expense) benefit........................ 41.6% (17.1)%
==== =====
</TABLE>
Deferred tax assets and liabilities are comprised of the following (in
thousands):
<TABLE>
<CAPTION>
COMPANY
--------------------------
DECEMBER 31, SEPTEMBER 28,
1995 1996
------------ -------------
<S> <C> <C>
Deferred tax assets:
Accounts receivable valuation allowances.......... $ 5,058 $ 3,913
Inventory reserves................................ 5,950 2,186
Fixed assets...................................... 4,578 3,310
Accrued expenses.................................. 2,617 3,529
Other deductible temporary differences............ 46 71
------- -------
Total deferred tax assets........................... 18,249 13,009
------- -------
Deferred tax liabilities:
Inventory step-up and beginning basis difference
in opening inventory............................. 6,680 --
Puerto Rico tollgate tax.......................... 22 1,418
Federal benefit of deferred state taxes........... 780 935
Other taxable temporary differences............... 412 --
------- -------
Total deferred tax liabilities...................... 7,894 2,353
------- -------
Net deferred tax assets............................. $10,355 $10,656
======= =======
Noncurrent portion of deferred tax assets........... $ 4,315 $ 4,132
======= =======
Current portion of deferred tax assets.............. $ 6,040 $ 6,524
======= =======
</TABLE>
At December 31, 1995 and September 28, 1996, the Company has not provided a
valuation allowance against its deferred tax assets because, based upon its
current operating plans, the Company believes that it is more likely than not
that the assets will be realized through future profitable operations.
Estimated taxes have been provided for the Company's international
operations assuming repatriation of all available earnings. The Predecessor's
and the Company's manufacturing operations in Puerto Rico qualify for income
tax credit available under Section 936 of the Internal Revenue Code. Recent
legislation will phase out the income tax credit allowed under Section 936
over a ten year period. The phase out period will allow a tax credit under
present law through December 31, 2001. The credit will be subject to further
limitation through December 31, 2005, and thereafter the credit is eliminated.
F-19
<PAGE>
WESLEY-JESSEN HOLDING, INC.
(TO BE RENAMED WESLEY JESSEN VISION CARE, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. RETIREMENT BENEFITS
Pensions
Eligible employees of the Predecessor in the United States and certain other
countries were participants, along with employees of other Schering-Plough
subsidiaries, in defined benefit pension plans sponsored by Schering-Plough.
Benefits under these plans are generally based upon the participants' average
final earnings and years of credited service, and take into account
governmental retirement benefits. Schering-Plough's funding policy is to
contribute actuarially determined amounts, after taking into consideration the
funded status of each plan and regulatory limitations. Pension cost allocated
by Schering-Plough to the Predecessor for 1993 and 1994 amounted to $0.7
million and $0.8 million, respectively, and was offset in full by the
allocated return on pension plan assets for a net cost of zero; the
Predecessor was allocated a net credit of $0.2 million for the period from
January 1, 1995 through June 28, 1995.
Effective June 29, 1995, the employees of the Company terminated
participation in the Schering-Plough pension plans. Pursuant to the Wesley
Jessen Acquisition agreement, the United States participants' pension
liabilities and the related assets are to be transferred from the Schering-
Plough plan to a new plan that is presently being established by the Company,
the Wesley Jessen Cash Balance Pension Plan (the "Plan"). The amounts of
pension liabilities and accompanying assets to be transferred from the
Schering-Plough plan to the Plan have not been finalized but are both
estimated to be approximately $4.5 million. Pending transfer to the Plan, the
pension assets will earn a 7% rate of return guaranteed by Schering-Plough.
The Plan is a defined benefit plan, effective as of January 1, 1996,
covering substantially all United States employees (including Puerto Rico).
Under the Plan, the Company will contribute a percentage of compensation for
each participant (annual pay credits) based upon years of service, excluding
the period June 29, 1995 to December 31, 1995 and with the Predecessor.
Additionally, the Plan provides for a specified return (interest credits) on
participants' account balances. Under the Plan, annual pay credits and
interest credits will be accumulated in participants' accounts as the basis
for their Plan benefits. The Company will contribute actuarially determined
amounts to fund Plan benefits within regulatory minimum requirements and
maximum tax deductible limits. Vesting occurs after five years of service and
includes service during the period June 29, 1995 to December 31, 1995. The
Company has applied to the Internal Revenue Service for approval of the Plan.
Net pension expense for the pension plan includes the following components
(in thousands):
<TABLE>
<CAPTION>
COMPANY
--------------------------
JUNE 29 JANUARY 1,
THROUGH THROUGH
DECEMBER 31, SEPTEMBER 28,
1995 1996
------------ -------------
<S> <C> <C>
Service costs--benefits earned during the period..... $-- $ 324
Interest cost on projected benefit obligation........ 151 271
Expected return on plan assets....................... (151) (236)
Net amortization and deferral........................ -- 45
---- -----
Net pension expense................................ $-- $ 404
==== =====
</TABLE>
F-20
<PAGE>
WESLEY-JESSEN HOLDING, INC.
(TO BE RENAMED WESLEY JESSEN VISION CARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<S> <C>
===
</TABLE>
The following table sets forth the funded status and amounts recognized in
the consolidated balance sheet (in thousands):
<TABLE>
<CAPTION>
COMPANY
------------------------------------
DECEMBER 31, 1995 SEPTEMBER 28, 1996
----------------- ------------------
<S> <C> <C>
Actuarial present value of benefit obliga-
tions:
Vested benefit obligations.............. $4,017 $ 4,160
Nonvested benefit obligations........... 228 232
------ -------
Accumulated benefit obligation............ $4,245 4,392
====== =======
Plan assets at fair value................. $4,500 4,736
Projected benefit obligation.............. 4,245 4,750
------ -------
Plan assets in excess of (less than) pro-
jected benefit obligations............... 255 (14)
Unrecognized prior service cost........... -- 696
Unrecognized net (gain)................... (255) (1,086)
------ -------
Pension liability recognized.............. $ -- $ (404)
====== =======
</TABLE>
Assumptions used in the actuarial computations are as follows:
<TABLE>
<CAPTION>
COMPANY
------------------------------------
DECEMBER 31, 1995 SEPTEMBER 28, 1996
----------------- ------------------
<S> <C> <C>
Discount rate.............................. 7.25% 8.0%
Expected rate of compensation increase..... 5.0% 5.0%
Expected rate of return on plan assets..... 7.0% 7.0%
</TABLE>
Postretirement benefits other than pensions
Eligible United States retirees of the Predecessor and their dependents were
provided postretirement health care and other benefits under benefit plans
sponsored by Schering-Plough. Eligibility for such benefits depended upon age
and years of service, and retirees shared in the cost of health care benefits.
Postretirement health care cost allocated to the Predecessor by Schering-
Plough for fiscal years 1993, 1994, and for the period from January 1, 1995
through June 28, 1995 was $0.6 million, $0.3 million and $0.3 million,
respectively. In conjunction with the Acquisition, the Company did not assume
any existing retiree postretirement benefit obligations. The Company does not
offer postretirement health care benefits to its employees.
F-21
<PAGE>
WESLEY-JESSEN HOLDING, INC.
(TO BE RENAMED WESLEY JESSEN VISION CARE, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. GEOGRAPHICAL INFORMATION
Financial information by geographic area is as follows (in thousands):
<TABLE>
<CAPTION>
PREDECESSOR
-----------------------------------
JANUARY 1
YEAR ENDED YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31, JUNE 28,
1993 1994 1995
------------ ------------ ---------
<S> <C> <C> <C>
Net sales:
Domestic................................. $ 98,744 $105,569 $ 45,366
International............................ 23,867 19,273 8,879
Eliminations............................. (19,225) (15,202) (3,226)
-------- -------- --------
Net sales.............................. $103,386 $109,640 $ 51,019
======== ======== ========
Total assets:
Domestic................................. $204,401 $183,714 $183,855
International............................ 17,368 17,393 14,195
Eliminations............................. (7,022) (9,678) (6,595)
-------- -------- --------
Total assets........................... $214,747 $191,429 $191,455
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
COMPANY
--------------------------
JUNE 29 JANUARY 1
THROUGH THROUGH
DECEMBER 31, SEPTEMBER 28,
1995 1996
------------ -------------
<S> <C> <C>
Net sales:
Domestic........................................... $ 49,198 $87,524
International...................................... 8,786 15,128
Eliminations....................................... (3,669) (6,604)
-------- -------
Net sales........................................ $ 54,315 $96,048
======== =======
Total assets:
Domestic........................................... $ 55,361 $55,731
International...................................... 12,661 13,037
Eliminations....................................... (692) (5,525)
-------- -------
Total assets..................................... $ 67,330 $63,243
======== =======
</TABLE>
14. COMMITMENTS AND CONTINGENCIES
Leases
The Company leases a warehouse distribution facility under a non-cancelable
operating lease that expires April 30, 2005. The terms of this lease were
determined at the Wesley Jessen Acquisition date to be adverse to the Company
as the lease terms committed to by Schering-Plough exceeded the current market
rates for a similar lease, which was considered in determining the estimated
fair values of net assets at the Wesley Jessen
F-22
<PAGE>
WESLEY-JESSEN HOLDING, INC.
(TO BE RENAMED WESLEY JESSEN VISION CARE, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Acquisition date. The Company also leases certain computer and other equipment
under operating leases. Total rent expense was as follows (in thousands):
<TABLE>
<S> <C>
Predecessor
Year ended December 31, 1993.......................................... $2,903
======
Year ended December 31, 1994.......................................... $2,983
======
The period from January 1, 1995 through June 28, 1995 ................ $1,513
======
Company
The period from June 29, 1995 through December 31, 1995 .............. $ 494
======
The period from January 1, 1996 through September 28, 1996 ........... $1,112
======
</TABLE>
Future minimum lease payments under non-cancelable operating leases at
December 31, 1995 were as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
-----------
<S> <C>
September 30, 1997................................................................. $ 530
September 30, 1998................................................................. 542
September 30, 1999................................................................. 468
September 30, 2000................................................................. 455
September 30, 2001................................................................. 466
Thereafter......................................................................... 2,287
------
Total obligations.................................................................. $4,748
======
</TABLE>
Litigation
The Company has certain product liability, personal injury and employment
related litigation and claims pending in the normal course of its business.
Management believes that any uninsured losses resulting from the resolution of
such litigation and claims would not have a material adverse impact on the
Company's financial position or results of operations as presented in the
accompanying financial statements.
15. SUBSEQUENT EVENT--ACQUISITION OF PILKINGTON BARNES HIND GROUP
On October 2 , 1996, the Company acquired the contact lens business
operating under the name Pilkington Barnes Hind Group from Pilkington plc (the
"Barnes-Hind Acquisition") for approximately $62.4 million, comprising cash
consideration of $57.4 million and a subordinated promissory note in the
principal amount of $5.0 million bearing interest at 8% per year, payable in
kind (the "Pilkington Note"). Fees of $2.1 million were also incurred in
connection with the closing of the acquisition. The purchase price is subject
to adjustments based upon certain net current asset and capital expenditure
measures as of the closing date of the transaction. The Pilkington Note along
with accrued interest thereon, is payable on February 1, 2005. The Pilkington
Note is subordinate to all current and long-term debt of the Company and is
subject to acceleration in specific circumstances, including a public offering
of the Company's common stock from which certain investors receive any of the
proceeds. In connection with the structuring of the refinancing described in
Note 9 and the Barnes-Hind Acquisition, the Company paid fees of $3.0 million
to Bain Capital, Inc.
The Barnes-Hind Acquisition will be accounted for by the purchase method.
Accordingly, the results of operations of the Barnes-Hind business will be
included with those of the Company for periods commencing on October 2, 1996.
Based upon preliminary purchase accounting, no significant goodwill or
negative goodwill arose from the transaction.
F-23
<PAGE>
WESLEY-JESSEN HOLDING, INC.
(TO BE RENAMED WESLEY JESSEN VISION CARE, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The unaudited pro-forma combined condensed balance sheet of the Company and
Barnes-Hind as of September 28, 1996 is set out below, after giving pro forma
effect as of September 28, 1996 to (1) the Barnes-Hind Acquisition; (2) the
refinancing described in Note 9; (3) approximately $3.5 million of
restructuring expenses expected to be incurred in late 1996 by the Company
following the Barnes-Hind Acquisition; (4) extraordinary losses of $2.8
million related to writing off capitalized financing fees in connection with
the October 2, 1996 financing; and (5) a significant non-recurring increase in
cost of goods sold of approximately $24 million, based on Barnes-Hind
inventory at October 1, 1996, due to the application of purchase accounting
for the Barnes-Hind Acquisition (in millions):
<TABLE>
<CAPTION>
ASSETS
------
<S> <C>
Current assets.................................................... $121.7
Property, plant and equipment, net................................ 33.4
Other assets...................................................... 12.5
------
$167.6
======
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
----------------------------------------------
<S> <C>
Current liabilities............................................... $ 78.4
Negative goodwill................................................. 10.8
Long term debt (excluding current maturities)..................... 100.0
Other liabilities................................................. 0.5
Stockholder's equity (deficit).................................... (22.1)
------
$167.6
======
</TABLE>
In connection with the Barnes-Hind Acquisition, the Company entered into a
voluntary consent order with the Federal Trade Commission which provides,
among other things, that the Company must divest Barnes-Hind's U.S. Natural
Touch Product Line by January 27, 1997. The Company is currently evaluating
divestiture opportunities. Should an agreement be reached in the near future,
the purchase accounting would be revised to include a revaluation of the
assets associated with the U.S. Natural Touch Product Line such that no gain
or loss would result from such divestiture as is required under generally
accepted accounting principles.
The unaudited pro forma combined results of operations for the Company and
Barnes-Hind are set out below, giving pro forma effect to: (i) the Wesley-
Jessen Acquisition; (ii) the Barnes-Hind Acquisition; (iii) the refinancing
described in Note 9; (iv) the estimated recurring cost savings to the Company
from facilities and personnel rationalizations; (v) elimination of non-
recurring increases to cost of goods sold as a result of applying purchase
accounting to inventories and excluding non-recurring charges for
restructuring the Wesley-Jessen operations following the Barnes-Hind
Acquisition; (vi) the divestiture of Barnes-Hind's U.S. Natural Touch Product
Line; and (vii) adjusting the income tax (expense) benefit to an effective
rate of 40%, each as if the transactions had occurred as of January 1, 1995
(in millions):
<TABLE>
<CAPTION>
JANUARY 1
YEAR ENDED THROUGH
DECEMBER 31, 1995 SEPTEMBER 28, 1996
----------------- ------------------
<S> <C> <C>
Net sales............................ $231.0 $187.1
====== ======
Net income........................... $ 0.4 $ 11.1
====== ======
</TABLE>
The pro forma results are not necessarily indicative of what actually would
have occurred if the Barnes-Hind Acquisition had been in effect for the
periods presented and are not intended to be a projection of future results,
which are dependent on the ability of the Company to accomplish its objectives
in connection with the Barnes-Hind Acquisition.
F-24
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders, Pilkington Barnes Hind Group:
We have audited the accompanying combined balance sheets of Pilkington
Barnes Hind Group as of March 31, 1995 and 1996, and the related combined
statements of operations, parent company investment and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Pilkington Barnes
Hind Group as of March 31, 1995 and 1996, and the results of its combined
operations and its combined cash flows for each of the years then ended, in
conformity with generally accepted accounting principles in the United States.
The accompanying combined financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to
the financial statements, the Company has suffered recurring losses from
operations that raises substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are also
described in Note 1. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
As discussed in Note 16 to the financial statements, an agreement was
entered into in July 1996, where certain assets and liabilities of the Company
will be sold.
Coopers & Lybrand L.L.P.
San Jose, California
July 26, 1996
F-25
<PAGE>
PILKINGTON BARNES HIND GROUP
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
--------------------
1995 1996
--------- ---------
(IN THOUSANDS OF
U.S. DOLLARS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $ 12,810 $ 14,958
Trade accounts receivable, less allowance for doubtful
accounts of $1,902 in 1995 and $1,671 in 1996........... 21,882 26,207
Receivables from affiliated companies.................... 147 67
Inventories.............................................. 38,139 30,128
Prepaids and other current assets........................ 3,423 4,821
Deferred income taxes.................................... 35 306
--------- ---------
Total current assets.................................... 76,436 76,487
Property, plant and equipment, net........................ 25,039 33,346
Other assets.............................................. 838 2,351
--------- ---------
Total assets............................................ $ 102,313 $ 112,184
========= =========
LIABILITIES AND PARENT COMPANY INVESTMENT
Current liabilities:
Notes payable to banks................................... $ 2,974 $ 963
Accounts payable:
Trade.................................................... 9,963 6,736
Affiliates............................................... 758 331
Notes payable to parent and affiliated companies......... 83,317 4,108
Accrued liabilities...................................... 8,846 8,128
Accrued payroll and related liabilities.................. 5,961 6,422
Deferred income taxes.................................... 459 1,748
Dividends payable........................................ 522 4,542
--------- ---------
Total current liabilities............................... 112,800 32,978
Long-term debt, due to affiliated companies............... 4,577 5,343
Other liabilities......................................... 3,674 3,183
--------- ---------
Total liabilities....................................... 121,051 41,504
--------- ---------
Commitments and contingencies (Notes 11 and 12).
Parent company investment (deficit)....................... (18,738) 70,680
--------- ---------
Total liabilities and parent company investment......... $ 102,313 $ 112,184
========= =========
</TABLE>
F-26
<PAGE>
PILKINGTON BARNES HIND GROUP
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------
1995 1996
---------- ----------
(IN THOUSANDS OF
U.S. DOLLARS)
<S> <C> <C>
Net sales............................................... $ 124,994 $ 132,581
---------- ----------
Costs and expenses:
Cost of sales......................................... 62,435 63,341
Research and development.............................. 10,317 7,884
Selling and marketing................................. 37,609 43,292
General and administrative............................ 21,516 22,536
---------- ----------
131,877 137,053
---------- ----------
Operating loss.......................................... 6,883 4,472
Interest income......................................... (615) (773)
Interest expense........................................ 4,623 4,315
---------- ----------
Loss before provision for income taxes.................. 10,891 8,014
Provision for income taxes.............................. 2,708 3,116
---------- ----------
Net loss................................................ $ 13,599 $ 11,130
========== ==========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-27
<PAGE>
PILKINGTON BARNES HIND GROUP
COMBINED STATEMENTS OF PARENT COMPANY INVESTMENT
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<S> <C>
BALANCES, APRIL 1, 1994............................................. $ (15,710)
Net loss............................................................ (13,599)
Net change in cumulative translation adjustments.................... 617
Dividends declared.................................................. (820)
Net change in parent company investment............................. 10,774
---------
Balances, March 31, 1995............................................ (18,738)
Net loss............................................................ (11,130)
Net change in cumulative translation adjustments.................... (4,020)
Dividends declared.................................................. (4,542)
Net change in parent company investment............................. 109,110
---------
Balances, March 31, 1996............................................ $ 70,680
=========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-28
<PAGE>
PILKINGTON BARNES HIND GROUP
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------
1995 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................ $ (13,599) $ (11,130)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation........................................ 6,749 4,017
Provision for excess and obsolete inventory......... 3,048 1,891
Provision for doubtful accounts..................... 359 972
Increase in net deferred taxes...................... 383 1,109
(Gain) loss on disposal/sale of property, plant and
equipment.......................................... 29 (230)
Changes in assets and liabilities:
Accounts receivable--trade.......................... (910) (6,034)
Accounts receivable--affiliate...................... 4,424 9,434
Inventories......................................... (1,842) 5,287
Prepaids and other current assets................... 855 (1,513)
Other assets........................................ (123) (1,598)
Accounts payable--trade............................. (1,068) (2,964)
Accounts payable--affiliated companies.............. 572 (411)
Accrued and other current liabilities............... (234) 110
Other long-term liabilities......................... 937 (220)
---------- ----------
Net cash used in operating activities............... (420) (1,280)
---------- ----------
Cash flows from investing activities:
Capital expenditures................................ (12,899) (13,572)
Proceeds from sale of fixed assets.................. 28 974
---------- ----------
Net cash used in investing activities............... (12,871) (12,598)
---------- ----------
Cash flows from financing activities:
Net receipts (payments) under notes payable to
banks.............................................. 138 (1,923)
Decrease (increase) in notes payable to parent and
affiliated companies............................... 10,765 (69,031)
Borrowings on long-term debt due to affiliated com-
panies............................................. 2,047 1,096
Cash infusions from parent and affiliated companies. 90,579
Dividends paid to parent............................ (427) (498)
Net change in parent company investment............. 6,334 (3,780)
---------- ----------
Net cash provided by financing activities............. 18,857 16,443
---------- ----------
Effect of exchange rate changes on cash and cash
equivalents.......................................... 988 (417)
---------- ----------
Net increase in cash and cash equivalents............. 6,554 2,148
Cash and cash equivalents at beginning of year........ 6,256 12,810
---------- ----------
Cash and cash equivalents at end of year.............. $ 12,810 $ 14,958
========== ==========
Supplemental disclosures of cash flow information:
Interest paid......................................... $ 4,623 $ 4,315
========== ==========
Taxes paid............................................ $ 218 $ 643
========== ==========
Supplemental disclosures of noncash financing activi-
ties:
Dividends declared but not paid....................... $ 457 $ 4,558
========== ==========
Affiliated debt converted to parent company invest-
ment................................................. $ 7,695
========== ==========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-29
<PAGE>
PILKINGTON BARNES HIND GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS OF U.S. DOLLARS)
1. BASIS OF PRESENTATION:
Pilkington Barnes Hind Group (the Company) is a leading supplier of contact
lenses throughout the world. The Company is headquartered in Sunnyvale,
California with principal manufacturing sites in Southampton, England and San
Diego, California. The Company's contact lenses are sold directly in the U.S.,
Canada, most of Europe, Japan and Australia. Sales through distributors extend
the geographic coverage to Asia, Latin America, the Middle East, Africa and
European territories not served by direct sales.
The accompanying combined financial statements present the combined assets,
liabilities, revenues and expenses of all contact lens manufacturing and
distribution operations of Pilkington Barnes Hind Group, a vision care
division of Pilkington plc (Pilkington). The ultimate holding company,
Pilkington, is listed on the United Kingdom stock exchange. All significant
transactions between operations within the Company have been eliminated.
These combined financial statements are presented as if the Company existed
as a separate entity for the years presented. These combined financial
statements are presented exclusive of two other divisions of the Company which
were sold during the year ended March 31, 1996. These divisions (contact lens
solutions and contact lens raw materials manufacturing) have been excluded in
order to reflect the financial position and results of operations of the
contact lens manufacturing and distribution operations only.
Revenues, expenses, assets and liabilities that are specifically identified
as relating to the two other divisions have been excluded. Where revenues,
expenses, assets and liabilities could not be specifically identified,
estimates of amounts to be excluded have been made based on the activity of
the respective lines of business, which management believes to be reasonable.
These combined financial statements include transactions with Pilkington for
treasury functions, tax services, internal audit services, risk management
services, research and development, and travel (see Note 14). In addition, in
fiscal 1995 and 1996, certain costs shared with other Pilkington U.S. entities
have been allocated to the Company. Shared costs have been allocated based
upon usage, number of employees and other methods which management believes to
be reasonable.
The financial information included herein may not necessarily reflect the
financial position, results of operations or cash flows of the Company in the
future or what the financial position, results of operations or cash flow of
the Company would have been if it was a separate, stand-alone company during
the periods presented. However, management believes that, with respect to
general and administrative expenses, the amounts reflected in the combined
statements of operations are not less than the amounts the Company would have
incurred had the Company been an unaffiliated company in those periods.
The Company relies substantially on the financial support of Pilkington,
which has historically provided funding to the Company, if required, to
sustain business operations. Such support has, to date, been provided in the
form of cash investments and forgiveness of payables and intercompany debt;
however, continued support cannot be guaranteed (see Note 16).
As shown in the accompanying financial statements, the Company incurred a
net loss of $13,599 and $11,130 for the years ended March 31, 1995 and 1996,
respectively. Factors such as the recurring losses suffered by the Company,
the requirement for the ongoing support of Pilkington and the pending sale of
the Company (see Note 16), among others, raise substantial doubt about its
ability to continue as a going concern. Recoverability of a part of the
recorded asset amounts shown in the accompanying balance sheet is dependent
upon continued profitable operations and the ability to obtain required
working capital to fund operations. The
F-30
<PAGE>
PILKINGTON BARNES HIND GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS)
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts and the amount and
classification of liabilities that might be necessary should the Company be
unable to continue in existence.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Cash and Cash Equivalents:
Cash and cash equivalents, which are held at a variety of financial
institutions located in the United States, Europe and Asia, consist primarily
of short-term investments with a maturity of three months or less when
purchased, carried at cost which approximates market. Deposits in banks may
exceed the amount of insurance provided on such deposits. The Company has not
experienced any material losses relating to any investment instruments.
Fair Value of Financial Instruments:
The amounts reported for cash equivalents, accounts receivable, accounts
payable and accrued liabilities are considered to approximate fair values
based on comparable market information available at March 31, 1996. Based upon
interest rates available to the Company for debt with comparable maturities,
the carrying values of the Company's notes payable approximate fair values.
Fair Value of Financial Instruments, continued:
Financial instruments which potentially subject the Company to
concentrations of credit risk comprise, principally, cash, cash equivalents
and accounts receivables. The Company invests its cash in government
securities and time deposits. The Company performs ongoing evaluations of its
customers' financial condition and does not require collateral. The Company
maintains allowances for potential credit losses and such losses have been
within management's expectations.
Inventories:
Inventories are stated at the lower of standard cost (which approximates
actual cost on the first-in, first-out basis) or market. Inventories have been
reduced to what management believes are levels appropriate for the current
level of sales. Management has developed a program to reduce inventory to
desired levels over the near term and believes no material loss will be
incurred on its disposition. No estimate can be made of a range of amounts of
loss that are reasonably possible should the program not be successful.
Management Estimates:
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Property, Plant and Equipment:
Property, plant and equipment are stated at cost and are depreciated on a
straight-line basis over the estimated useful lives of the related assets
(buildings--10 to 40 years; plant and office equipment--3 to 10 years).
Leasehold improvements and leased equipment are amortized over the lesser of
their useful lives or the remaining term of the related leases.
F-31
<PAGE>
PILKINGTON BARNES HIND GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS)
Upon sale or retirement, the costs and related accumulated depreciation are
eliminated from the respective accounts and the resulting gain or loss is
included in current income. Repairs and maintenance are charged to expense as
incurred.
Foreign Currency Translation:
The assets and liabilities, and revenue and expense accounts of the
Company's foreign subsidiaries have been translated using the exchange rate at
the balance sheet date, and the weighted average exchange rate for the period,
respectively.
The net effect of the translation of the accounts of the Company's
subsidiaries has been included in parent company investment as cumulative
foreign currency translation adjustments. Gains or losses that arise from
exchange rate changes on transactions denominated in a currency other than the
local currency are included in income as incurred.
Revenue Recognition:
Sales and related cost of sales are recognized upon shipment of product. No
individual customer accounts for more than 10% of sales. Sales are reported
net of a provision for estimated product returns and warranty reserves.
Income Taxes:
Income taxes have been provided in the Company's statements of income as if
the Company were a separate taxable entity and no recognition has been given
to tax attributes available to other members of the Pilkington consolidated
group or the Company's other divisions. Temporary and permanent differences
related to the Company's contact lens business have been allocated in
accordance with the methodology used for determining revenues, expenses,
assets and liabilities, as described in Note 1.
Where amounts paid to other Pilkington entities pursuant to a tax sharing
agreement were different from the computed current tax expense, the difference
has been treated as an addition to or deduction from parent company
investment. The current tax expense calculated for subsidiaries that did not
enter into a tax sharing agreement has been treated as an addition to parent
company investment.
Advertising:
The Company expenses advertising costs as they are incurred. Advertising
expense for the years ended March 31, 1995 and 1996 was $1,741 and $4,775,
respectively.
Recent Pronouncements:
In March 1995, the Financial Accounting Standards Board issued Statement No.
121 (SFAS No. 121), "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of," which establishes accounting
standards for the impairment of long-lived assets, certain identifiable
intangibles and goodwill related to those assets which are held and used or
disposed of. SFAS No. 121 will be effective for fiscal years beginning after
December 15, 1995. The Company does not anticipate that the adoption of SFAS
No. 121 will have a material adverse effect on the Company's results of
operations.
F-32
<PAGE>
PILKINGTON BARNES HIND GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS)
3. INVENTORIES:
<TABLE>
<CAPTION>
MARCH 31,
---------------
1995 1996
------- -------
<S> <C> <C>
Raw materials................................................... $ 1,589 $ 1,733
Work in process................................................. 5,645 4,789
Finished goods.................................................. 30,905 23,606
------- -------
$38,139 $30,128
======= =======
</TABLE>
Inventories are stated net of reserves of $6,787 and $4,915 at March 31,
1995 and 1996, respectively.
4. PROPERTY, PLANT AND EQUIPMENT:
<TABLE>
<CAPTION>
MARCH 31,
------------------
1995 1996
-------- --------
<S> <C> <C>
Buildings................................................... $ 8,224 $ 1,645
Leasehold improvements...................................... 9,949 10,880
Machinery................................................... 40,780 47,486
Office equipment and software............................... 11,182 11,579
-------- --------
70,135 71,590
Less accumulated depreciation and amortization.............. (56,164) (51,773)
-------- --------
13,971 19,817
Land........................................................ 4,585 4,510
Construction in progress.................................... 6,483 9,019
-------- --------
$ 25,039 $ 33,346
======== ========
</TABLE>
At March 31, 1995 and 1996, machinery and office equipment included assets
acquired under capital leases with a capitalized cost of $2,777 and $2,617,
respectively. Related accumulated amortization totaled $566 and $979,
respectively. Interest totaling $344 and $527 was capitalized during fiscal
1995 and 1996, respectively. Fully depreciated assets were $34,164 and $33,306
at March 31, 1995 and 1996, respectively.
5. CAPITAL LEASE OBLIGATIONS:
At March 31, 1996, future minimum lease payments under capital lease
obligations are summarized as follows:
<TABLE>
<CAPTION>
PERIOD ENDING MARCH 31,
-----------------------
<S> <C>
1997................................................................... $ 797
1998................................................................... 651
1999................................................................... 401
------
Total minimum lease payments........................................... 1,849
Less amount representing interest...................................... (133)
------
Present value of future minimum lease payments......................... 1,716
Less current portion................................................... (726)
------
Long-term capital lease obligation..................................... $ 990
======
</TABLE>
F-33
<PAGE>
PILKINGTON BARNES HIND GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS)
6. SHORT-TERM BORROWING AGREEMENTS:
Lines of credit for short-term borrowings have been established with banks
in the United States, Canada, Italy, and the United Kingdom. The agreements
generally have no termination date but are reviewed annually for renewal. At
March 31, 1995, the Company had an outstanding balance of $2,974 and an unused
line of credit amounting to $2,799. At March 31, 1996, the Company had an
outstanding balance of $963 and unused lines of credit amounting to $3,841.
Short-term borrowing arrangements have also been made with affiliated
Pilkington Group Companies. At March 31, 1995, the Company had an outstanding
balance of $83,317 and unused credit lines of $4,851. At March 31, 1996, the
Company had an outstanding balance of $4,108 and unused credit lines of
$56,029 (see Note 14).
Included in the outstanding balance at March 31, 1995 was $8,040 of
noninterest bearing debt from an affiliated company. In October 1995, this
amount was converted to Parent Company Investment (see Note 14).
The weighted average interest rate was 6.8% and 7.10% at March 31, 1995 and
1996, respectively. Interest rates are generally based upon U.K. prime rates
or the London Inter Bank Offering Rate plus up to a 1% premium.
7. LONG-TERM DEBT, AFFILIATED COMPANIES:
<TABLE>
<CAPTION>
MARCH 31,
1996
---------
<S> <C>
Loan with Pilkington Finance Limited, interest at 6.75% payable quar-
terly, due at June 30, 1997......................................... $5,343
======
</TABLE>
8. DEFINED CONTRIBUTION PENSION PLAN:
The Company sponsors a defined contribution plan covering U.S. employees.
The plan provides for limited Company matching of participants' contributions.
Contributions to the defined contribution plans charged to operations were
$739 and $679 for the years ended March 31, 1995 and 1996, respectively.
9. DEFINED BENEFIT PENSION PLANS:
The Company participates in a noncontributory Pilkington single-employer
defined benefit pension plan (Domestic Pension Plan) in the United States
covering substantially all full-time domestic employees, as well as a
contributory single-employer defined benefit pension plan covering certain
employees in the United Kingdom (International Pension Plan).
Benefit payments for domestic employees are based principally on earnings
during the last five- or ten-year period prior to retirement and/or on length
of service. Employees are eligible to participate in domestic plans within one
year of employment and are vested after five years of service. For the
International Pension Plan, benefits are based on length of service and on
compensation during the last ten years of service prior to retirement.
The Company's policy is to fund such amounts as are necessary, on an
actuarial basis, to provide for the plans' current service costs and the
plans' prior service costs over their amortization periods.
F-34
<PAGE>
PILKINGTON BARNES HIND GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS)
The following table provides the net periodic pension cost of the Pilkington
Domestic Pension Plan and the Company's International Pension Plan.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------
1995 1996
---------- ----------
<S> <C> <C>
DOMESTIC PENSION PLAN:
Service cost-benefits earned during the period.......... $ 1,738 $ 1,460
Interest cost on projected benefit obligation........... 2,702 2,762
Actual return on plan assets............................ (942) (3,111)
Net amortization and deferral........................... (1,445) 175
Curtailment gain on sale of lenscare division......... (1,212)
---------- ----------
Total net periodic pension cost..................... $ 2,053 $ 74
========== ==========
INTERNATIONAL PENSION PLAN:
Service cost-benefits earned during the period.......... $ 410 $ 434
Interest cost on projected benefit obligation........... 451 497
Actual return on plan assets............................ (428) (486)
Net amortization and deferral........................... 31 32
---------- ----------
Total net periodic pension cost..................... $ 464 $ 477
========== ==========
</TABLE>
Costs incurred and charged to the Company's operations for its portion of
the Domestic Pension Plan were $1,472 and $1,069 for the years ended March 31,
1995 and 1996, respectively.
The significant actuarial assumptions for the following tables as of the
measurement date are as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------
1995 1996
---------- ----------
<S> <C> <C>
DOMESTIC PENSION PLAN:
Discount rate......................................... 8.5% 7.5%
Expected long-term rate of return on plan assets...... 8.0% 8.0%
Rate of increase in future compensation levels........ 5.5% 5.5%
INTERNATIONAL PENSION PLAN:
Discount rate......................................... 8.5% 8.5%
Expected long-term rate of return on plan assets...... 8.5% 8.5%
Rate of increase in future compensation levels........ 6.5% 6.5%
</TABLE>
At March 31, 1996, the Domestic and International Pension Plan assets
include cash items, fixed income securities, common stock and insurance
policies.
F-35
<PAGE>
PILKINGTON BARNES HIND GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS)
The funded status as of the measurement date was as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------
1995 1996
---------- ----------
<S> <C> <C>
DOMESTIC PENSION PLAN:
Actuarial present value of benefit obligations:
Vested benefit obligation............................ $ 25,187 $ 31,862
========== ==========
Accumulated benefit obligation....................... $ 26,642 $ 33,085
========== ==========
Projected benefit obligation......................... 33,000 40,116
Plan assets at fair value............................ 35,898 46,645
---------- ----------
Projected benefit obligation in excess of plan as-
sets................................................ (2,898) (6,529)
Unrecognized net gain................................ 5,000 5,978
Unrecognized prior service cost...................... (1,817) (1,394)
---------- ----------
Accrued (prepaid) pension cost....................... $ 285 $ (1,945)
========== ==========
INTERNATIONAL PENSION PLAN:
Actuarial present value of benefit obligations:
Vested benefit obligation............................ $ 5,604 $ 5,908
========== ==========
Accumulated benefit obligation....................... $ 5,661 $ 5,986
========== ==========
Projected benefit obligation......................... 6,202 6,586
Plan assets at fair value............................ 5,941 6,455
---------- ----------
Accrued pension cost................................. $ 261 $ 131
========== ==========
</TABLE>
The accrued (prepaid) pension cost allocated to the Company for its portion
of the Domestic Pension Plan was $700 and $(232) at March 31, 1995 and 1996,
respectively.
The measurement date for the Domestic Pension Plan for the years ended March
31, 1995 and 1996 is December 31, 1994 and 1995, respectively. The measurement
date for the International Pension Plan is March 31, 1995 and 1996,
respectively.
10. INCOME TAXES:
Components by region of loss before provision for income taxes consist of
the following:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------
1995 1996
---------- ----------
<S> <C> <C>
North America........................................... $ (17,306) $ (15,618)
Europe.................................................. 4,835 6,124
Australia............................................... (23) (99)
Asia.................................................... 1,603 1,579
---------- ----------
$ (10,891) $ (8,014)
========== ==========
</TABLE>
F-36
<PAGE>
PILKINGTON BARNES HIND GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS)
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
-----------------
1995 1996
------ ----------
<S> <C> <C> <C>
Current:
Foreign..................................................... $2,325 $2,007
Deferred:
Foreign..................................................... 383 1,109
------ ------
$2,708 $3,116
====== ======
</TABLE>
A reconciliation between income tax provisions computed at the U.S. federal
statutory rate and the effective rate reflected in the combined statements of
income:
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
-------------
1995 1996
----- -----
<S> <C> <C>
Benefit at statutory rate....................................... (35.0)% (35.0)%
Permanent items................................................. 6.2 2.7
Foreign taxes................................................... 24.9 38.9
Losses not benefited............................................ 28.8 32.3
----- -----
24.9 % 38.9 %
===== =====
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------
1995 1996
---------- ----------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts...................... $ 195 $ 378
Reserves and accruals................................ 4,448 3,136
Depreciation......................................... 921 483
Net operating losses................................. 33,991 39,645
---------- ----------
Total gross deferred tax assets.................... 39,555 43,642
Less valuation allowance............................. (39,520) (43,336)
---------- ----------
Net deferred tax assets.............................. 35 306
---------- ----------
Deferred tax liabilities:
Deferred revenue..................................... (112) (107)
Other................................................ (347) (1,641)
---------- ----------
Deferred tax liabilities............................. (459) (1,748)
---------- ----------
Total.............................................. $ (424) $ (1,442)
========== ==========
</TABLE>
The net changes in the total valuation allowance for the years ended March
31, 1995 and 1996 relate primarily to movements in certain domestic net
operating losses.
The Company has recorded a deferred tax asset of $306 at March 31, 1996.
Realization is dependent on generating sufficient taxable income in the
following year in certain tax paying subsidiaries. Although realization
F-37
<PAGE>
PILKINGTON BARNES HIND GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS)
is not assured, management believes it is more likely than not that all of the
deferred tax asset will be realized. The amount of the deferred tax asset
considered realizable, however, could be reduced in the near term, if
estimates of future taxable income during the carryforward period are reduced.
On a separate company basis, the Company had cumulative tax loss
carryforwards in the U.S. of approximately $35,000 in 1995 and $54,000 in
1996. As a result of the utilization of some of those losses by other members
of the U.S. consolidated group, however, the tax losses which may be used by
the Company to offset future taxable income were approximately $14,800 in 1995
and $13,800 in 1996. Of the $13,800 remaining in 1996, $4,200 will expire in
2007, $6,300 will expire in 2008 and $3,300 will expire in 2009.
The Company has not recognized a deferred tax liability for the
undistributed earnings of its foreign subsidiaries that arose in 1996 and
prior years because the Company does not expect those unremitted earnings to
reverse and become taxable to the Company in the foreseeable future. A
deferred tax liability will be recognized when the Company expects that it
will recover those undistributed earnings in a taxable manner, such as through
receipt of dividends or sale of the investments. The cumulative undistributed
earnings of these subsidiaries are not practicable to determine.
11. COMMITMENTS:
The Company leases certain warehouse and office facilities, office equipment
and automobiles under noncancelable operating leases which expire in years
1997 through 2018. The Company is responsible for taxes, insurance and
maintenance expenses related to the leased facilities. Under the terms of
certain lease agreements, the leases may be extended, at the Company's option,
and certain of the leases provide for adjustments of the minimum monthly rent.
Future minimum annual lease payments under the leases are as follows:
<TABLE>
<CAPTION>
PERIOD ENDING MARCH 31,
-----------------------
<S> <C>
1997.............................................................. $6,357
1998.............................................................. 4,180
1999.............................................................. 1,831
2000.............................................................. 1,222
2001.............................................................. 1,022
Thereafter........................................................ 6,678
</TABLE>
Rent expense for the years ended March 31, 1995 and 1996 was $5,010 and
$4,826, respectively.
12. CONTINGENCIES:
The Company is involved in a lawsuit relating to a worldwide patent
licensing agreement whereby it is alleged that the Company did not make good
faith efforts to manufacture, market and distribute the related contact lens.
The license agreement contains an arbitration provision and since
investigation of the plaintiffs' claims is still in progress, the Company's
potential liability in this matter, if any, cannot yet be determined.
The Company is involved in a dispute with a former employee in Germany
relating to alleged unfair dismissal.
In addition to the matters discussed above, in the ordinary course of
business, various legal actions and claims pending have been filed against the
Company. While it is reasonably possible that such contingencies, including
those matters discussed above, may result in a cost greater than that provided
for in the financial statements, it is the opinion of management that the
ultimate liability, if any, with respect to these matters, will not materially
affect the combined cash flows; results of operations or financial position of
the Company.
F-38
<PAGE>
PILKINGTON BARNES HIND GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS)
The Company has been notified by the United States Environmental Protection
Agency (USEPA) that it has been deemed a Potentially Responsible Party (PRP)
under the Comprehensive Environmental, Response, Compensation and Liability
Act of 1980 (or Superfund) at the Omega Chemical Corporation Site in Whittier,
California. The Company is one of approximately 145 PRPs identified at the
site who appear to share joint and several liability. The USEPA has issued an
administrative order to each of these parties directing that certain
investigative and remedial work be undertaken. The investigative work is still
under way and the extent of the contamination has not yet been determined.
Consequently, the Company's ultimate liability for this matter can not yet be
quantified and no provision has been made in the accompanying combined
financial statements.
13. CURRENT VULNERABILITIES DUE TO CERTAIN CONCENTRATIONS:
The Company currently buys a raw material, an important component of one of
its products, from one supplier. Although there are a limited number of
manufacturers of the raw material, management believes that other suppliers
could provide the raw material on comparable terms. A change in suppliers,
however, could cause a delay in manufacturing and a possible loss of sales,
which would adversely affect operating results. Included in the Company's
consolidated balance sheet at March 31, 1996, are the net assets of one of the
Company's two manufacturing operations which produce the Company's best
selling product, all of which are located in a single facility in the United
Kingdom and which total approximately $11.3 million.
14. SIGNIFICANT RELATED PARTY TRANSACTIONS:
Notes Payable to Parent Company:
The Company has various payables with affiliates (see Note 6).
Interest expense on notes payable to parent and affiliated companies for the
years ended March 31, 1995 and 1996 was $4,258 and $4,180, respectively.
Payables to Affiliated Companies and Other Activities:
During the year ended March 31, 1996, the Company received cash totaling
$88,760, representing the proceeds from the sale of an affiliated business. An
affiliated company also agreed to convert debt totaling $7,695 to parent
company investment. During the years ended March 31, 1995 and 1996, the
Company was forgiven current payables from affiliates totaling $8,474 and
$12,039, respectively. All transactions have been treated as additions to
parent company investment.
Pilkington charges the Company for services and shared costs relating to
treasury functions, tax return preparations, internal audit service, risk
management services, research and development and travel. For the years ended
March 31, 1995 and 1996, the Company expensed $561 and $1,036, respectively,
relating to Pilkington services and shared costs. In addition, Pilkington
facilitates the Company's purchases of certain outside services, such as
legal, worker's compensation and other insurance premiums.
Other Related Party Transactions:
During the year ended March 31, 1995, the Company purchased a house from a
director of the Company for $217. The house was subsequently sold for $172
during the year ended March 31, 1996.
F-39
<PAGE>
PILKINGTON BARNES HIND GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS)
15. WORLDWIDE OPERATIONS:
The Company operates in the ophthalmic industry in the distribution of
contact lenses.
A summary of information about the Company's geographic areas is as follows:
<TABLE>
<CAPTION>
NORTH
AMERICA EUROPE AUSTRALIA ASIA ELIMINATIONS TOTAL
------- ------- --------- ------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED MARCH 31,
1995
Revenue:
External................ $78,407 $38,254 $1,633 $ 6,700 $124,994
Internal................ 43,343 25,933 $(69,276)
Operating loss (profit). 13,131 (5,205) 4 (1,606) 559 6,883
Identifiable assets..... 69,151 28,578 116 4,534 (66) 102,313
YEAR ENDED MARCH 31,
1996
Revenue:
External................ 78,907 44,050 1,793 7,831 132,581
Internal................ 32,050 35,691 14 (67,755)
Operating loss (profit). 12,154 (6,136) 85 (1,586) (45) 4,472
Identifiable assets..... 65,786 38,546 379 7,494 (21) 112,184
</TABLE>
16. SUBSEQUENT EVENTS:
On July 5, 1996, Pilkington signed an agreement for the sale of certain
assets and liabilities of the Company at an aggregate purchase price of
$78,875. The purchase price is subject to adjustment based upon closing working
capital of the divested assets. The assets and liabilities to be divested
consist primarily of inventory, accounts receivable, fixed assets, accounts
payable and certain accrued liabilities and total approximately $57,000.
F-40
<PAGE>
[SAMPLE OF ADVERTISEMENT TARGETED TO EYECARE PRACTITIONERS]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHO-
RIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR THE UNDERWRITERS. THIS PRO-
SPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO
BUY, THE COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN
THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 10
The Company............................................................... 15
Use of Proceeds........................................................... 16
Dividend Policy........................................................... 17
The Reclassification...................................................... 17
Capitalization............................................................ 18
Dilution.................................................................. 19
Unaudited Pro Forma Financial Data........................................ 20
Selected Historical Consolidated
Financial Data........................................................... 32
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 35
Business.................................................................. 45
Management................................................................ 62
Principal Stockholders.................................................... 71
Certain Transactions...................................................... 74
Description of Certain Indebtedness....................................... 75
Description of Capital Stock.............................................. 76
Shares Eligible for Future Sale........................................... 79
Underwriting.............................................................. 81
Experts................................................................... 82
Legal Matters............................................................. 83
Additional Information.................................................... 83
Index to Financial Statements............................................. F-1
</TABLE>
UNTIL , 1997 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICI-
PATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DE-
LIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOT-
MENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES
[WJ LOGO]
WESLEY JESSEN VISION CARE, INC.
COMMON STOCK
-----------------
PROSPECTUS
-----------------
MERRILL LYNCH & CO.
ALEX. BROWN & SONS
INCORPORATED
BT SECURITIES CORPORATION
SALOMON BROTHERS INC
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a statement of estimated expenses, to be paid solely by the
Company, of the issuance and distribution of the securities being registered:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $17,424
NASD filing fee.................................................. 6,250
Nasdaq National Market original listing fee...................... *
Blue Sky fees and expenses (including attorneys' fees and ex-
penses)......................................................... *
Printing expenses................................................ *
Accounting fees and expenses..................................... *
Transfer agent's fees and expenses............................... *
Legal fees and expenses.......................................... *
Miscellaneous expenses........................................... *
-------
Total........................................................ $ *
=======
</TABLE>
- --------
*To be provided by Amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is incorporated under the laws of the State of Delaware. Section
145 of the General Corporation Law of the State of Delaware ("Section 145")
provides that a Delaware corporation may indemnify any persons who are, or are
threatened to be made, parties to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation), by reason of
the fact that such person was an officer, director, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding, provided such person acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the corporation's best interests and, with respect to any criminal action
or proceeding, had no reasonable cause to believe that his conduct was
illegal. A Delaware corporation may indemnify any persons who are, or are
threatened to be made, a party to any threatened, pending or completed action
or suit by or in the right of the corporation by reason of the fact that such
person was a director, officer, employee or agent of such corporation, or is
or was serving at the request of such corporation as a director, officer,
employee or agent of another corporation or enterprise. The indemnity may
include expenses (including attorneys' fees) actually and reasonably incurred
by such person in connection with the defense or settlement of such action or
suit, provided such person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the corporation's best interests except
that no indemnification is permitted without judicial approval if the officer
or director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses
which such officer or director has actually and reasonably incurred.
The Company's Certificate of Incorporation and By-laws provide for the
indemnification of Directors and officers of the Company to the fullest extent
permitted by Section 145.
In that regard, the By-laws provide that the Company shall indemnify any
person whom it has the power to indemnify by Section 145 from or against any
and all of the expenses, liabilities or other matters referred to or covered
in Section 145, and such indemnification is not exclusive of other rights to
which such person shall be entitled under any By-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to
II-1
<PAGE>
action in such person's official capacity for or in behalf of the Company
and/or any subsidiary of the Company and as to action in another capacity
while holding such office and shall continue as to such person who has ceased
to be a director, officer, employee, or agent of the Company and/or subsidiary
of the Company and shall inure to the benefit of the heirs, executors, and
administrators of such person.
The Company expects to enter into indemnification agreements with each of
its executive officers and Directors prior to the completion of the Offering.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since its incorporation on May 11, 1995, the Company has issued the
following securities without registration under the Securities Act of 1933
(the "Securities Act"):
(1) In connection with the Wesley Jessen Acquisition, the Company issued
on June 28, 1995 an aggregate of 415,000 shares of Class L Common Stock for
an aggregate purchase price of approximately $7,224,000.40 and 3,735,000
shares of Common Stock for an aggregate purchase price of approximately
$301,003.65 to Bain Capital Fund IV, L.P., Bain Capital Fund IV-B, L.P.,
BCIP Associates, BCIP Trust Associates, L.P., Randolph Street Partners and
Robert A. Sandler.
(2) Effective as of June 28, 1995, the Company issued to certain members
of management an aggregate of 11,534 shares of Class L Common Stock and
103,818 shares of Common Stock. The purchase price of the Class L Common
Stock and Common Stock was $17.40723 and $0.08059 per share, respectively.
(3) Effective as of July 11, 1995, the Company issued to a member of
management 2,500 shares of Class L Common Stock and 22,500 shares of Common
Stock. The purchase price of the Class L Common Stock and Common Stock was
$17.40723 and $0.08059 per share, respectively.
(4) Effective as of December 11, 1995, January 1, 1996, March 1, 1996 and
June 28, 1996, the Company issued to certain newly-hired members of
management 143, 214, 216 and 286 shares of Class L Common Stock,
respectively, and 1,286, 1,928, 1,932 and 2,572 shares of Common Stock,
respectively. In each case, the purchase price of the Class L Common Stock
and the Common Stock was $17.40723 and $0.08059 per share, respectively.
(5) On July 17, 1996, the Company issued to a member of management 107
shares of Class L Common Stock and 964 shares of Common Stock. The purchase
price of the Class L Common Stock and Common Stock was $17.40723 and
$0.08059 per share, respectively.
(6) On October 2, 1996, the Company issued a subordinated seller's note
in the aggregate principal amount of $5 million to Pilkington plc as part
of the consideration for the Barnes-Hind Acquisition.
The sales and issuances of securities listed above in paragraphs (1) and (6)
were deemed to be exempt from registration under the Securities Act by virtue
of Section 4(2) thereof, as transactions not involving a public offering. The
sales and issuances of securities listed above in paragraphs (2), (3), (4) and
(5) were deemed to be exempt from registration under the Securities Act by
virtue of Section 3(b) thereof and Rule 701 promulgated thereunder.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS.
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S>
*1.1 Form of Underwriting Agreement.
2.1 Purchase and Sale Agreement, dated as of May 5, 1995, between
Schering Corporation and WJ Acquisition Corp.+
2.2 Purchase Agreement, dated as of July 5, 1996, between the
Company and Pilkington plc.+
*3.1(i) Restated Certificate of Incorporation of the Company.
*3.1(ii) Restated By-laws of the Company.
*4.1 Form of certificate representing shares of Common Stock, $0.01
par value per share.
4.2 Stockholders Agreement, dated October 22, 1996, among the
Company and the stockholders named therein.
4.3 Amended and Restated Registration Rights Agreement, dated as of
October 22, 1996, between the Company and the stockholders
named therein.
4.4 Credit Agreement, dated as of October 2, 1996, between the
Company, Wesley Jessen Corporation, the various lending
institutions named therein and Bankers Trust Company, as
Agent.+
4.5 Security Agreement, dated as of October 2, 1996, among the
Company, Wesley Jessen Corporation, certain other subsidiaries
named therein and Bankers Trust Company, as Collateral Agent.+
4.6 Pledge Agreement, dated as of October 2, 1996, by the Company,
Wesley Jessen Corporation, certain other subsidiaries named
therein and Bankers Trust Company, as Collateral Agent and
Pledgee.+
4.7 Subsidiary Guaranty, dated as of October 2, 1996, made by each
subsidiary of Wesley Jessen Corporation named therein and
Bankers Trust Company, as Agent.
4.8 Subordinated seller's note, dated as of October 2, 1996, by
Wesley Jessen Corporation in favor of Pilkington plc.
*5.1 Opinion and consent of Kirkland & Ellis.
*10.1 Wesley Jessen Vision Care, Inc. 1997 Key Employees Stock
Incentive Plan.
*10.2 Wesley Jessen Vision Care, Inc. Non-Employee Director Stock
Option Plan.
10.3 Amended and Restated Advisory Agreement, dated as of October 2,
1996, between Wesley Jessen Corporation and Bain Capital, Inc.
10.4 Stock Purchase Agreement, dated as of June 28, 1995, among
Wesley-Jessen Holding, Inc. and the various purchasers named
therein.
*10.5 Agreement, dated as of December 21, 1992, between Wesley Jessen
Corporation and Tech Medical Inc., regarding casting cups, as
amended.
10.6 Employment Agreement, dated June 28, 1995, between the Company
and Kevin J. Ryan.
10.7 Employment Agreement, dated June 28, 1995, between the Company
and Edward J. Kelley.
*10.8 Wesley-Jessen Holding, Inc. 1995 Stock Purchase and Option Plan.
*10.9 Wesley-Jessen Holding, Inc. 1996 Stock Option Plan.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
10.10 Management Agreement, effective as of June 28, 1995 and dated as of
April 5, 1996, by and between the Company and Kevin J. Ryan (with
an attached schedule setting forth the terms of other Named
Executives).
*10.11 Form of Indemnification Agreement.
*10.12 Lease agreements relating to the Company's Southampton, United
Kingdom manufacturing facility.
*10.13 Lease agreements relating to the Company's San Diego, California
manufacturing facility.
*11.1 Earnings Per Share.
21.1 Subsidiaries of the Company.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Coopers & Lybrand L.L.P.
*23.3 Consent of Kirkland & Ellis (included in Exhibit 5.1).
24.1 Powers of Attorney (included in signature page).
27.1 Financial Data Schedule.
</TABLE>
- --------
*To be filed by amendment.
+The Company agrees to furnish supplementally to the Commission a copy of any
omitted schedule or exhibit to such agreement upon request by Commission.
(b) FINANCIAL STATEMENT SCHEDULES.
Financial statement schedules included in this Registration Statement:
Schedule II--Valuation and qualifying accounts for the periods from January
1, 1993 through September 28, 1996.
All other schedules for which provisions is the applicable accounting
regulations of the Commission are not required under the related instructions,
are inapplicable or not material, or the information called for thereby is
otherwise included in the financial statements and therefore has been omitted.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriter
at closing specified in the underwriting agreement certificates in such
denominations and registered in such names as requested by the underwriter to
permit prompt delivery to each purchaser.
The undersigned registrant hereby undertakes:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF CHICAGO, STATE OF
ILLINOIS, ON DECEMBER 5, 1996.
Wesley-Jessen Holding Inc.
/s/ Kevin J. Ryan
By: _________________________________
Kevin J. Ryan
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Kevin J. Ryan, Edward J. Kelley, Stephen G.
Pagliuca and Adam W. Kirsch, and each of them, his true and lawful attorneys-
in-fact and agents, with full power of substitution and resubstitution, for
him and in his name, place and stead, in any and all capacities, to sign any
or all amendments (including post-effective amendments) to this registration
statement (and any registration statement filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended, for the offering which this
Registration Statement relates), and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
* * * *
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<S> <C> <C>
/s/ Stephen G. Pagliuca Chairman of the Board December 5, 1996
____________________________________
Stephen G. Pagliuca
/s/ Kevin J. Ryan President and Director December 5, 1996
____________________________________ (principal executive
Kevin J. Ryan officer)
/s/ Edward J. Kelley Chief Financial Officer, December 5, 1996
____________________________________ Treasurer and Director
Edward J. Kelley (principal financial and
accounting officer)
/s/ Adam W. Kirsch Director December 5, 1996
____________________________________
Adam W. Kirsch
/s/ John W. Maki Director December 5, 1996
____________________________________
John W. Maki
/s/ John J. O'Malley Director December 5, 1996
____________________________________
John J. O'Malley
</TABLE>
II-5
<PAGE>
WESLEY-JESSEN HOLDING, INC.
FINANCIAL STATEMENT SCHEDULE
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
CHARGED TO
BEGINNING COSTS AND ENDING
BALANCE EXPENSES DEDUCTIONS BALANCE
--------- ---------- ---------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Year ended December 31, 1993........... $ 1,717 $ 2,312 $ (1,678) $ 2,351
Year ended December 31, 1994........... $ 2,351 $ 4,871 $ (2,022) $ 5,200
Period from January 1, 1995 through
June 28, 1995......................... $ 5,200 $ 1,450 $ (2,456) $ 4,194
Period from June 29, 1995 through De-
cember 31, 1995....................... $ 5,342* $ 861 $ (1,548) $ 4,655
Period from January 1, 1996 through
September 28, 1996.................... $ 4,655 $ 1,020 $ (2,248) $ 3,427
ALLOWANCE FOR SALES RETURNS AND ADJUST-
MENTS
Year ended December 31, 1993........... $10,445 $21,066 $(21,206) $10,305
Year ended December 31, 1994........... $10,305 $27,273 $(21,768) $15,810
Period from January 1, 1995 through
June 28, 1995......................... $15,810 $10,962 $(15,993) $10,779
Period from June 29, 1995 through De-
cember 31, 1995....................... $10,779 $ 4,088 $ (7,642) $ 7,225
Period from January 1, 1996 through
September 28, 1996.................... $ 7,225 $ 7,960 $ (6,885) $ 8,300
</TABLE>
*Includes purchase accounting adjustment of $1,148 to adjust Predecessor policy
to that of the Company.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION PAGE
------ ----------- ----
<C> <S> <C>
*1.1 Form of Underwriting Agreement.
2.1 Purchase and Sale Agreement, dated as of May 5, 1995,
between Schering Corporation and WJ Acquisition Corp.+
2.2 Purchase Agreement, dated as of July 5, 1996, between the
Company and Pilkington plc.+
*3.1(i) Restated Certificate of Incorporation of the Company.
*3.1(ii) Restated By-laws of the Company.
*4.1 Form of certificate representing shares of Common Stock,
$0.01 par value per share.
4.2 Stockholders Agreement, dated October 22, 1996, among the
Company and the stockholders named therein.
4.3 Amended and Restated Registration Rights Agreement, dated
as of October 22, 1996, between the Company and the
stockholders named therein.
4.4 Credit Agreement, dated as of October 2, 1996, between
the Company, Wesley Jessen Corporation, the various
lending institutions named therein and Bankers Trust
Company, as Agent.+
4.5 Security Agreement, dated as of October 2, 1996, among
the Company, Wesley Jessen Corporation, certain other
subsidiaries named therein and Bankers Trust Company, as
Collateral Agent.+
4.6 Pledge Agreement, dated as of October 2, 1996, by the
Company, Wesley Jessen Corporation, certain other
subsidiaries named therein and Bankers Trust Company, as
Collateral Agent and Pledgee.+
4.7 Subsidiary Guaranty, dated as of October 2, 1996, made by
each subsidiary of Wesley Jessen Corporation named
therein and Bankers Trust Company, as Agent.
4.8 Subordinated seller's note, dated as of October 2, 1996,
by Wesley Jessen Corporation in favor of Pilkington plc.
*5.1 Opinion and consent of Kirkland & Ellis.
*10.1 Wesley Jessen Vision Care, Inc. 1997 Key Employees Stock
Incentive Plan.
*10.2 Wesley Jessen Vision Care, Inc. Non-Employee Director
Stock Option Plan.]
10.3 Amended and Restated Advisory Agreement, dated as of
October 2, 1996, between Wesley Jessen Corporation and
Bain Capital, Inc.
10.4 Stock Purchase Agreement, dated as of June 28, 1995,
among Wesley-Jessen Holding, Inc. and the various
purchasers named therein.
*10.5 Agreement, dated as of December 21, 1992, between Wesley
Jessen Corporation and Tech Medical Inc., regarding
casting cups, as amended.
10.6 Employment Agreement, dated June 28, 1995, between the
Company and Kevin J. Ryan.
10.7 Employment Agreement, dated June 28, 1995, between the
Company and Edward J. Kelley.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION PAGE
------ ----------- ----
<C> <S> <C>
*10.8 Wesley-Jessen Holding, Inc. 1995 Stock Purchase and Option
Plan.
*10.9 Wesley-Jessen Holding, Inc. 1996 Stock Option Plan.
10.10 Management Agreement, effective as of June 28, 1995 and
dated as of April 5, 1996, by and between the Company and
Kevin J. Ryan (with an attached schedule setting forth
the terms of other Named Executives).
*10.11 Form of Indemnification Agreement.
*10.12 Lease Agreements relating to the Company's Southampton,
United Kingdom manufacturing facility.
*10.13 Lease Agreements relating to the Company's San Diego,
California manufacturing facility.
*11.1 Earnings Per Share.
21.1 Subsidiaries of the Company.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Coopers & Lybrand L.L.P.
*23.3 Consent of Kirkland & Ellis (included in Exhibit 5.1).
24.1 Powers of Attorney (included in signature page).
27.1 Financial Data Schedule.
</TABLE>
- --------
*To be filed by amendment.
+The Company agrees to furnish supplementally to the Commission a copy of any
omitted schedule or exhibit to such agreement upon request by Commission.
<PAGE>
EXHIBIT 2.1
PURCHASE AND SALE AGREEMENT
by and between
SCHERING CORPORATION
("Seller")
and
WJ ACQUISITION CORP.
("Buyer")
Dated as of May 5, 1995
<PAGE>
TABLE OF CONTENTS
Page
----
<TABLE>
<S> <C> <C>
ARTICLE 1 PURCHASE AND SALE OF ASSETS........................................ 2
1.1 Certain Definitions................................................ 2
1.2 Transfer of Assets................................................. 3
1.3 Excluded Assets and Excluded Liabilities........................... 7
1.4 Consideration and Payment.......................................... 9
1.5 Allocation of Purchase Price....................................... 10
1.6 Post-Closing Audit................................................. 11
1.7 Resolution of Audit Disputes....................................... 12
1.8 Access to Books and Records........................................ 12
1.9 Audit and Other Expenses........................................... 13
1.10 Audit Adjustment................................................... 13
ARTICLE 2 LIABILITIES AND INDEMNITY.......................................... 15
2.1 Indemnity Liabilities of Seller and Indemnification by Seller...... 15
2.2 Indemnity Liabilities of Buyer and Indemnification by Buyer........ 17
2.3 Indemnification Procedure.......................................... 18
2.4 Subrogation........................................................ 20
2.5 Exclusive Remedy................................................... 20
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER........................... 20
3.1 Organization; Corporate Power...................................... 20
3.2 Due Authorization.................................................. 20
3.3 Non-Contravention; Material Consents............................... 21
3.4 Financial Data..................................................... 22
3.5 [Intentionally omitted]............................................ 23
3.6 Undisclosed Liabilities............................................ 23
3.7 Real Property...................................................... 23
3.8 Tangible Personal Property; Title to Assets........................ 25
3.9 Subsidiaries....................................................... 25
3.10 Raw Materials and Services; Absence of Interests
in Suppliers or Distributors....................................... 27
3.11 Compliance with Laws............................................... 27
3.12 Permits and Licenses............................................... 28
3.13 Litigation, Claims and Proceedings................................. 28
3.14 Intellectual Property.............................................. 29
3.15 Contracts.......................................................... 30
3.16 Absence of Material Adverse Change................................. 31
3.17 Conduct of Business................................................ 31
3.18 [Intentionally omitted]............................................ 32
</TABLE>
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<TABLE>
<S> <C> <C>
3.19 Broker's and Finder's Fees......................................... 32
3.20 FDA and Related Matters............................................ 33
3.21 Labor Relations and Employees...................................... 33
3.22 Employee Benefit Plans; Severance Policies......................... 33
3.23 Taxes.............................................................. 34
3.24 Insurance.......................................................... 34
3.25 Accuracy of Statements............................................. 35
ARTICLE 4 REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER................. 35
4.1 Organization, Corporate Power, Prior Activities.................... 35
4.2 Due Authorization; No Breach; Material Consents.................... 35
4.3 Broker's and Finder's Fees......................................... 37
4.4 Hart-Scott-Rodino; International Filings........................... 37
ARTICLE 5 COVENANTS AND AGREEMENTS........................................... 37
5.1 Conduct of Business................................................ 38
5.2 Access to Properties and Records................................... 39
5.3 Required Consents and Filings; Further Assurances.................. 41
5.4 Employment Offers; Benefits........................................ 42
5.5 Bulk Sales Law..................................................... 47
5.6 Title Insurance and Surveys........................................ 47
5.8 Restrictions on Transfer of Assets................................. 51
5.9 Insurance.......................................................... 53
5.10 Return Preparation; Tax Payments................................... 54
5.11 Examinations....................................................... 55
5.12 Financing.......................................................... 56
5.13 Schedule Supplements............................................... 57
5.14 Collection of Receivables.......................................... 57
5.15 Transitional Assistance............................................ 57
5.16 Resale Certificate................................................. 58
5.17 Guaranties......................................................... 58
5.18 Intercompany Accounts.............................................. 59
5.19 Employee Matters................................................... 59
ARTICLE 6 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.............. 59
ARTICLE 7 SELLER'S CONDITIONS OF CLOSING..................................... 61
ARTICLE 8 BUYER'S CONDITIONS OF CLOSING...................................... 62
ARTICLE 9 TERMINATION........................................................ 64
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE 11 UNAUTHORIZED TRADE................................................. 65
11.1 Restrictions Against Unauthorized Trade............................ 65
11.2 Use of Names, Intellectual Property, etc........................... 66
ARTICLE 12 PUBLICITY; CONFIDENTIALITY......................................... 67
12.1 Publicity.......................................................... 67
12.2 Confidentiality.................................................... 67
ARTICLE 13 NOTICES............................................................ 68
ARTICLE 14 EXPENSES OF THE PARTIES............................................ 69
ARTICLE 15 MISCELLANEOUS...................................................... 70
15.1 Binding Effect; Assignment......................................... 70
15.2 Exhibits and Schedules............................................. 71
15.3 Counterparts....................................................... 72
15.4 Article Headings; Monetary Thresholds.............................. 72
15.5 Waiver............................................................. 72
15.6 Governing Law and Forum............................................ 73
15.7 Amendment and Modification......................................... 74
15.8 Entire Agreement................................................... 74
</TABLE>
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<PAGE>
LIST OF SCHEDULES
1.2(a)(ii)...............................................Permitted Encumbrances
1.2(a)(ix) Part I.................................................Registrations
1.2(a)(ix) Part II.....................................................Products
1.5................................................Allocation of Purchase Price
3.3(a)................................................Conflicts, Defaults, etc.
3.3(b)............................................Authorizations, Permits, etc.
3.4..............................Unaudited Special Purpose Financial Statements
3.6.....................................................Undisclosed Liabilities
3.7(d).......................................................Structural Matters
3.8(b)....................................................................Liens
3.9(a)....................................................Non-U.S. Subsidiaries
3.9(c)..................Right to Acquire Capital Stock of Non-U.S. Subsidiaries
3.12............................................Additional Permits and Licenses
3.13.........................................Litigation, Claims and Proceedings
3.14(a)...............................................Patents, Trademarks, etc.
3.14(b).................................................Notices of Infringement
3.15 Part I......................................................Contracts List
3.15 Part II.....................................................Defaults, etc.
3.16...................................................Material Adverse Changes
3.17....................................................Conduct of the Business
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<PAGE>
3.20.......................................................Regulatory Approvals
3.22..............................................................Benefit Plans
4.2(b)....................................Authorizations, Permits, etc. (Buyer)
4.3.................................................Brokers and Finders (Buyer)
5.1.........................................................Conduct of Business
5.4...........................................................Severance Program
5.4(c)(1).......................Actuarial, Economic and Demographic Assumptions
5.15......................................................Transitional Services
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<PAGE>
PURCHASE AND SALE AGREEMENT, dated as of May 5, 1995, by and between
SCHERING CORPORATION, a New Jersey corporation ("Seller"), and WJ ACQUISITION
CORP., a Delaware corporation ("Buyer").
R E C I T A L S
---------------
1. Seller, through its Wesley-Jessen division ("W-J"), is engaged in
the research, development, manufacture, marketing and sale of conventional and
disposable soft contact lenses in the United States and certain other countries
(the "Business").
2. Seller and its affiliates own or hold certain assets, including
fixed assets, capital stock of certain direct subsidiaries, real property,
leasehold interests, machinery, equipment, accounts receivable, inventory,
patents, technology, trademarks, contracts, Food and Drug Administration ("FDA")
and foreign registrations and approvals, customer lists and other intangible
property principally employed in, or required for the ongoing conduct of, the
Business by W-J.
3. Seller desires to sell, or cause to be sold, to Buyer, and Buyer
desires to purchase, or cause to be purchased, from Seller, all of Seller's and
its affiliates, rights, titles and interests in and to the Assets (as defined in
Article 1.2(c) hereof), subject to the assumption by Buyer of all of the
Liabilities (as defined in Article 1.4(b) hereof).
4. In association with and anticipation of the transactions
contemplated above, Seller and its affiliates may effect certain intercompany
transfers, including the dividend of certain Assets and Liabilities.
In consideration of the mutual promises set forth herein, and subject
to the terms and conditions hereof, Seller and Buyer agree as follows:
<PAGE>
ARTICLE 1
PURCHASE AND SALE OF ASSETS
---------------------------
1.1 Certain Definitions. As noted below, the following terms have the
respective meanings set forth in the following Articles of this Agreement:
Term Article
- ---- -------
Action Levels................................................... 5.7(a)(ii)
Assets.......................................................... 1.2(c)
Business........................................................ Recitals
Benefit Plans................................................... 3.22
Business Day.................................................... 1.4(a)
Buyer........................................................... Introduction
Claim........................................................... 2.3(b)
Closing......................................................... 10
Closing Date.................................................... 10
Code............................................................ S.4(b)(1)
Employee........................................................ 5.5(a)
Excluded Assets................................................. 1.3(a)
Excluded Liabilities............................................ 1.3(b)
FDA............................................................. Recitals
Financing....................................................... 5.12
Hazardous Substances............................................ 3.7(f)
Indemnification Deadline........................................ 6(b)
Indemnity Claim of Buyer........................................ 2.1
Indemnity Claim of Seller....................................... 2.2
Indemnified Party............................................... 2.3(a)
Insured Claims.................................................. 5.9(a)
Insured Liabilities............................................. 5.9(b)
Intellectual Property........................................... 3.14(a)
Items........................................................... 15.2(a)
Leased Facility................................................. 1.2(a)(iii)
Liabilities..................................................... 1.4(b)
Liens........................................................... 3.8(b)
Losses.......................................................... 2.1
Monetary Defects................................................ 5.6(a)
Non-Monetary Defects............................................ 5.6(a)
Non-U.S. Subsidiaries........................................... 1.2(b)
Non-U.S. Subsidiaries Shares.................................... 1.2(b)
Owned Facilities................................................ 1.2(a)(ii)
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<PAGE>
Term Article
- ---- -------
Permitted Encumbrances.......................................... 1.2(a)(ii)
Products........................................................ 1.2(a)(ix)
Purchase Price.................................................. 1.4(a)
Redemption Notice............................................... 5.7(a)(ii)
Redemption Response Notice...................................... 5.7(a)(iv)
Retained Facility............................................... 1.3(a)(ii)
Schering-Plough................................................. 1.3(a)(iii)
Subsidiary Agreements........................................... 1.2(b)
Seller.......................................................... Introduction
Seller's Policies............................................... 5.9(a)
Taxes........................................................... 3.22(b)
Title Commitments............................................... 5.6(a)
Title Company................................................... 5.6(a)
Transfer Taxes.................................................. 14
Transition Services Agreement................................... 7(i)
Unaudited Special Purpose Financial Statements.................. 3.4
Unaudited Special Purpose Closing Date Balance Sheet............ 1.6(a)
Unpermitted Encumbrances........................................ 5.6(a)
Value........................................................... 5.8(b)
W-J............................................................. Recitals
Wesley-Jessen................................................... 3.14(c)
Wesley-Jessen (France).......................................... 1.2(b)
1.2 Transfer of Assets. Upon the terms and subject to the conditions of
------------------
this Agreement, and except as otherwise set forth in Article 1.3 hereof, Seller
hereby agrees to sell or cause to be sold to Buyer and Buyer hereby agrees to
purchase at the Closing, subject to the assumption by Buyer of all of the
Liabilities:
(a) all of Seller's or its affiliates', as the case may be, rights,
titles and interests in and to the following, to the extent that same are
principally employed in, or required for the ongoing conduct of, the Business as
it is being conducted by W-J as of the date hereof with such changes, de
letions, additions or replacements hereto as may occur from the date hereof
until the Closing (as defined in Article 10 hereof) as permitted by this
Agreement:
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<PAGE>
(i) all patents and registered designs (issued and pending),
trademarks (registered, pending and used), service marks (registered,
pending and used), copyrights, patent, trademark and design applications
and registrations, customer lists, know-how and U.S. and foreign patent
and trademark rights of the Business and all other intellectual property
principally employed in, or required for the ongoing conduct of, the
Business as it is being conducted by W-J as of the date hereof other than
(x) that intellectual property covered by Article 1.3(a)(vii) hereof, (y)
licenses granted with respect to any commercially available software the
transfer of which is prohibited pursuant to the terms thereof or (z) as
otherwise provided in this Agreement;
(ii) fee title, subject to the permitted encumbrances set forth on
Schedule 1.2(a)(ii)(the "Permitted Encumbrances"), to the following real
-------------------
property: 2000 Clearwater Drive, Des Plaines, IL 60018 and P.O. Box 1980,
Rt. 173 Km. 1.1, Eljiboro Industrial Park, Cidra, PR 00739 (the "Owned
Facilities");
(iii) the leasehold interest in the following facility (the "Leased
Facility"): 2640 West Bradley Place, Chicago, IL 60618, to the extent that
same can be assigned to Buyer;
(iv) all of the goodwill of Seller and Seller's W-J division, and of
Wesley-Jessen, as the case may be, in connection with the Business,
together with the exclusive right of Buyer to represent itself as carrying
on the Business in succession to W-J;
(v) all accounts receivable with respect to the Business;
(vi) all of the fixed assets including plant, machinery and
equipment used in the Business and located at the Owned Facilities, the
Leased Facility and at the Retained Facility
-4-
<PAGE>
(as defined in Article 1.3(a)(ii) hereof) (other than ownership or
leasehold interests in the Retained Facility itself);
(vii) all of the finished goods inventory and work in progress and
raw materials inventory of the Business as of the Closing;
(viii) all contracts, books and records that are principally employed
in, or required for the ongoing conduct of, the Business as it is being
conducted by W-J as of the date hereof;
(ix) all existing and owned FDA Premarket Approval Applications and
Supplements and related documentation ("PMAs"), Investigational Device
Exemptions ("IDEs"), 510Ks and corresponding non-U.S. equivalents as set
forth on Part I of Schedule 1.2(a)(ix) relating in each case to the
-------------------
contact lens products manufactured by W-J as of the date hereof as set
forth on Part II of Schedule 1.2(a)(ix) (the "Products");
-------------------
(x) copies of and a non-exclusive right to use those items set
forth in Article 1.3(a)(vii) employed in, or required for the ongoing
conduct of, the Business as it is being conducted by W-J as of the date
hereof;
(xi) all claims and rights against third parties arising prior to
the Closing Date associated with or related to the Assets or Liabilities,
including without limitation the patent infringement claims set forth on
Schedule 3.14(b) (item 4); and
----------------
(xii) all other assets, material or equipment of whatsoever kind
and nature other than the Excluded Assets (as defined in Article 1. 3 (a)
owned by Seller and its affiliates, as the case may be, and that are
principally employed in, or required for the ongoing conduct of, the
Business as it is being conducted by W-J as of the date hereof.
-5-
<PAGE>
(b) Seller and Buyer shall pursuant to, and in accordance with, the
terms of this Agreement enter into, or cause their respective affiliates to
enter into, as soon as reasonably practicable following the date hereof separate
agreements (the "Subsidiary Agreements") for the purchase and sale of (i) all of
the assets and liabilities of Wesley-Jessen, a corporation organized under the
laws of France ("Wesley-Jessen (France)"), to the extent that same are
principally employed in, or required for the ongoing conduct of, the Business as
it is being conducted by W-J as of the date hereof and excluding investments in
affiliates thereof and cash and cash equivalents held thereby, and (ii) all of
the issued and outstanding shares of whatever class or value (the "Non-U.S.
Subsidiaries Shares") in the capital of, Wesley-Jessen (Japan) K.K., a corpora-
tion organized under the laws of Japan, Wesley-Jessen Limited, a corporation
organized under the laws of England, Wesley-Jessen S.A., a corporation
organized under the laws of Spain, Wesley-Jessen S.p.A., a corporation
organized under the laws of Italy and Wesley-Jessen (Canada) Inc., a
corporation organized under the laws of Canada (the "Non-U.S. Subsidiaries").
The Subsidiary Agreements shall be in substantially the forms
attached hereto as Exhibits A-1 and A-2, with such modifications as are
necessary and appropriate as a result of (i) differences in the individual Non-
U.S. Subsidiary and (ii) differences in local laws or customs, in order to
maintain substantially the same legal meaning and effect as provided for in this
Agreement.
(c) All assets and rights to be transferred pursuant to this
Article 1.2 (excluding the Excluded Assets as defined in Article 1.3 hereof)
shall hereinafter be referred to collectively as the "Assets".
-6-
<PAGE>
1.3 Excluded Assets and Excluded Liabilities.
----------------------------------------
(a) For the avoidance of doubt in connection with the purchase of
the Business and the Assets, the following assets, rights, properties or
interests are excluded from the Business and the Assets transferred hereby
(collectively, the "Excluded Assets"):
(i) all cash or cash equivalents;
(ii) the real property and leasehold interests located at 400 West
Superior Street, Chicago, Illinois (the "Retained Facility');
(iii) any intercompany receivables of the Business with Schering-
Plough Corporation, a New Jersey corporation and parent corporation of
Seller ("Schering-Plough"), Seller and/or any of their respective
affiliates existing on the Closing Date;
(iv) any capital stock of W-J Manufacturing Corporation, a Delaware
corporation;
(v) all claims and rights against third parties, including
insurance claims, arising prior to the Closing Date associated with or
related to the Excluded Assets or Excluded Liabilities;
(vi) all claims for refunds of taxes and other governmental charges
relating to the Business for periods ending prior to the Closing Date and
not shown on the Unaudited Special Purpose Financial Statements (as
defined in Article 3.4);
(vii) all finance, office policy and procedure manuals and all
internally generated (i.e., by Seller and/or any associated or affiliated
company) computer software and computer data which are used by Schering-
Plough, and/or any affiliate of Schering-Plough, in the ordinary course of
business, in each case as existing on the date hereof, with such changes,
-7-
<PAGE>
deletions, addition or replacements thereto as may occur from the date
hereof until the Closing as are permitted by the terms of this Agreement;
(viii) any asset, right, property or interest, including without
limitation any right to receive royalty or mile-stone payments, of Seller
or any of its affiliates principally associated with the solutions
business heretofore conducted by Seller and its affiliates; and
(ix) any other asset, right, property or interest of Seller or any
of its affiliates which are not principally employed in, or required for
the ongoing conduct of, the Business as it is being conducted by W-J as of
the date hereof.
(b) The following liabilities are excluded from the transactions
contemplated hereunder (the "Excluded Liabilities"):
(i) any liability or obligation for income, franchise or other
taxes (except for property, sales and use tax obligations which have been
accrued on W-J's books and records prior to the Closing Date) attributable
to periods ending on or before the Closing Date;
(ii) any obligation or liability relating to any employee benefit
plan maintained by Seller or Schering-Plough or any of their affiliates,
to the extent that any such obligation or liability is not assumed by
Buyer hereunder;
(iii) any intercompany obligation or liability of the Business with
Schering-Plough, Seller and/or any of their respective affiliates existing
on the Closing Date;
(iv) any liability or obligation relating to letters of comfort,
agreements or arrangements heretofore issued or entered into specifically
in contemplation of the transactions contemplated hereby and by the
Subsidiary Agreements to or with Charles Stroupe, Randall Bawin, Michael
Bante, Andrew Browning or any other employee of the
-8-
<PAGE>
Business in connection with their employment by Seller or its affiliates,
as the case may be; and
(v) any obligation or liability for borrowed money other than as
reflected in the Unaudited Special Purpose Closing Date Balance Sheet.
1.4 Consideration and Payment.
-------------------------
(a) As consideration for the Assets, Buyer shall at the Closing
pay, in cash, $47.5 million (the "Purchase Price"), by wire transfer of
immediately available Federal Reserve funds to the account(s) of Seller, which
account(s) shall be identified by Seller not later than two (2) Business Days
prior to the Closing. For purposes of this Agreement "Business Day" shall mean a
day when banks are open for business in New York City (other than a Saturday or
Sunday).
(b) As further consideration for the Business and the Assets, on and
as of the Closing Date, Buyer will assume the following debts, liabilities and
executory obligations of Seller and Wesley-Jessen, as the case may be, in
respect of the Business (the "Liabilities"), and assume, indemnify and hold
harmless, Seller, Schering-Plough, each of their affiliates, and their
respective directors, shareholders, partners, officers, employees, agents,
consultants, representatives, successors, transferees and assigns, from and
against any and all Losses (as defined in Article 2.1 hereof) in respect of the
following:
(i) executory obligations and accrued liabilities arising from and
after the Closing under the contracts, agreements, arrangements,
commitments, real property leases and personal property leases acquired by
or assigned to Buyer hereunder which are part of the Assets;
-9-
<PAGE>
(ii) debts, expenses, obligations and liabilities incurred and/or
accrued by Seller or W-J or Wesley-Jessen, as the case may be, with
respect to the Business and/or any of the Assets in the ordinary course of
business since December 31, 1994;
(iii) debts, expenses, obligations and liabilities reflected in the
Unaudited Special Purpose Financial Statements;
(iv) all trade accounts payable arising on or before the Closing
Date;
(v) costs associated with the response to, or the remediation of,
the presence of any Hazardous Substances (as defined in Article 3.7(f)
hereof) in, on or under the Owned Facilities or Leased Facility where the
performance of such response or remediation is not the express obligation
of Seller pursuant to Article 5.7 hereof; and
(vi) all other debts, expenses, obligations and liabilities arising
out of or relating to the Business and/or any of the Assets other than the
Excluded Liabilities.
(c) In addition to the Purchase Price, Buyer shall pay within five
Business Days following the Closing Date, in cash in United States dollars, an
amount equal to the cash balances (including all cash equivalents) held by the
Non-U.S. Subsidiaries (other than Wesley-Jessen (France)) as of the close of
business on the Business Day immediately preceding the Closing Date up to, but
not in excess of, US $400,000, by wire transfer of immediately available Federal
Reserve funds to the account(s) of Seller, as specified thereby in accordance
with Article 1.4(a).
1.5 Allocation of Purchase Price. The Purchase Price shall be allocated
----------------------------
to the Assets in accordance with Schedule 1.5 hereto and Seller and Buyer shall
------------
(i) reflect such specified Assets purchased and sold hereunder for tax reporting
purposes in accordance with Schedule 1.5, (ii) file all tax returns and tax
------------
reports in accordance with and based upon such allocation and (iii) take no
-10-
<PAGE>
position in any tax return, tax proceeding or tax audit which is inconsistent
with such allocation. Buyer agrees that it shall not file an election under
Section 338 of the U.S. Internal Revenue Code of 1986, as amended, or any
successor statute thereto with respect to the purchase and sale of Non-U.S.
Subsidiaries Shares.
1.6 Post-Closing Audit.
------------------
(a) As soon as practicable following the Closing Date, but in no
event later than 30 days thereafter, Seller shall prepare and deliver to Buyer
an unaudited special purpose closing date balance sheet of W-J, as at the
Closing Date (the "Unaudited Special Purpose Closing Date Balance Sheet"), which
shall reflect all known current liabilities as at the Closing Date.
(b) As soon as practicable following that date which is 180
calendar days after the Closing Date (the "Audit Date"), but in no event later
than 30 days after the Audit Date, Buyer shall cause Price Waterhouse L.L.P.
("PW") to prepare and deliver to Seller a special purpose statement of the
Determination Date Working Capital of W-J, including the basis of presentation
note thereto (the "Special Purpose Statement of Working Capital"), the
definitive form of which, upon signing by PW or the resolution of any
arbitration discussed below, shall be audited and referred to as the
"Determination Date Statement of Working Capital", together with PW's proposed
audit report thereon. The Determination Date Statement of Working Capital shall
present fairly in all material respects the Determination Date Working Capital
(as defined below) of W-J, utilizing the same underlying assumptions as and in
substantially the same format as the unaudited special purpose balance sheet
constituting part of the Unaudited Special Purpose Financial Statements,
including the note thereto, as set forth on Schedule 3.4.
------------
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<PAGE>
1.7 Resolution of Audit Disputes. Seller and its accountant ("Seller's
----------------------------
Accountant") shall have 30 days after Seller's receipt thereof to review the
Special Purpose Statement of Working Capital and the proposed related audit
report prepared by PW and to notify Buyer in writing of any disputes Seller may
have relating to the Special Purpose Statement of Working Capital. Seller's
written notice to Buyer of any dispute shall specify in detail all points of
disagreement and demand that a review of such dispute (a "Review") be conducted.
Seller and Buyer shall promptly cause Seller's Accountant and PW to consult with
respect to such points of disagreement in an effort to resolve all disputes. If
Seller's Accountant and PW are unable to resolve such disputes within 30 days of
Buyer's receipt of written notice of a Review, Seller's Accountant and PW shall
jointly select a firm of independent public accountants which has not performed
any services since January 1, 1994 for Buyer or Seller to act as arbitrator (the
"Arbitrator"). The Arbitrator shall decide all remaining points of disagreement
with respect to the Special Purpose Statement of Working Capital. All decisions
of the Arbitrator shall be final, conclusive and legally binding on all parties
hereto with respect to the Special Purpose Statement of Working Capital.
1.8 Access to Books and Records.
---------------------------
(a) Seller shall afford Buyer and PW and Buyer shall afford Seller
and Seller's Accountant such access to the books and records of W-J following
the Closing as is reasonably necessary for the preparation of the Unaudited
Special Purpose Closing Date Balance Sheet, the Special Purpose Statement of
Working Capital and the documents related to each of the foregoing.
(b) Buyer and Seller agree to use all reasonable efforts to
cooperate fully with PW and Seller's Accountant to effect the final
determinations and audit of the amount of Determination Date Working Capital.
Buyer and PW shall have the right to observe the taking of the inventory in
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<PAGE>
connection with the preparation of the Unaudited Special Purpose Closing Date
Balance Sheet and to examine the work papers and schedules and other documents
prepared by Seller and Seller's Accountant in connection therewith. Seller and
Seller's Accountant shall have the right to examine the work papers and
schedules and other documents prepared by Buyer and PW in connection with the
preparation of the Special Purpose Statement of Working Capital.
1.9 Audit and Other Expenses. The fees and expenses of PW and Seller's
------------------------
Accountant shall be paid by Buyer and Seller, respectively. The fees and
expenses of the Arbitrator (if any) incurred in connection with the final
determination of the amount of Determination Date Working Capital shall be paid
equally by Buyer, on the one hand, and Seller on the other.
1.10 Audit Adjustment.
----------------
(a) Following the completion of the post-closing audit provided
for in Article 1.6, if Determination Date Working Capital as reflected on the
Determination Date Statement of Working Capital shall be less than U.S. $18.5
million, then Seller shall pay to Buyer on the Audit Payment Date (as defined
below), by wire transfer in immediately available Federal Reserve funds to an
account identified by Buyer not later than two (2) Business Days prior to the
Audit Payment Date, an amount in cash equal to the amount by which Determination
Date Working Capital shall be less than U.S. $18.5 million, plus interest on
such amount accruing from the Closing Date to the Audit Payment Date (based on a
year of 365 days) at a rate equal to the weighted average of the rates payable
by Buyer and its subsidiaries, as the case may be, under the Financing.
(b) "Determination Date Working Capital" of W-J shall mean (x) 85%
of cash actually collected from customers during the period from, but not
including, the Closing Date to, and including, the Audit Date that relates to
product shipments that occurred on or prior to the Closing
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<PAGE>
Date, including all post-Closing "even exchanges" for products so shipped other
than for domestic molded lens products shipped on or prior to the Closing Date
and manufactured prior to Revision -3 (with respect to each customer, in the
absence of a bona fide dispute in respect of a receivable, cash being allocated
first to the earliest dated invoice), plus (y) 50% of total inventories,
saleable or otherwise usable (e.g., samples) and in each case free of
manufacturing defects, as reflected on the Unaudited Special Purpose Closing
Date Balance Sheet, the quantity of which shall be determined by 100% physical
count as of the Closing Date and the value of which shall be determined based on
W-J's 1995 standard costs but, with respect to the conventional lens finished
goods inventory, the valuation will be reduced by the amount shown on Report -
MPS 310R, Master Production Scheduling System Excess Inventory Valuation Report
dated as of the Closing Date and further reduced by any excess inventory reports
prepared by the Non-U.S. Subsidiaries but in no event shall the conventional
lens finished goods inventory exceed the value arrived at under generally
accepted accounting principles and, with respect to the molded lens finished
goods inventory, that valuation will be limited to the Revision 3 inventory plus
the Revision 2(b) inventory to the extent sold after the Closing and on or prior
to the Audit Date at a value of $1.08 per lens, minus (z) 100% of current
liabilities of W-J as of the Closing Date as reflected on the Unaudited Special
Purpose Closing Date Balance Sheet (all obligations and liabilities for borrowed
money shall be deemed to be current liabilities for purposes of this clause
(z)).
(c) "Audit Payment Date" shall mean the date which is five
Business Days after (i) 30 days after Seller receives the Special Purpose
Statement of Working Capital together with PW's proposed report thereon, if
Buyer shall not have received written notice from Seller within such 30-day
period demanding a Review, (ii) the date on which Seller's Accountant and PW
shall resolve
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<PAGE>
all disputes with respect to the amount of Determination Date Working Capital or
(iii) the date on which the Arbitrator shall resolve all points of disagreement
with respect to the amount of Determination Date Working Capital, as the case
may be and as contemplated by Article 1.7.
(d) If there is a payment under Article 1.10(a), such payment
shall be allocated first to reduce the Purchase Price theretofore allocated to
accounts receivable to an amount not less than the amount of accounts receivable
collected during the period from, but not including, the Closing Date to, and
including, the Audit Date, with any additional Purchase Price reduction to be
applied pro rata against all other Assets, in each case without reference to the
allocations provided f or in Article 1. S. Seller and Buyer shall (i) ref lect
the allocation (if any) provided for in the preceding sentence for tax reporting
purposes, (ii) file all tax returns and tax reports in accordance with and based
upon s such allocation and (iii) take no position in any tax return, tax
proceeding or tax audit which is inconsistent with such allocation.
ARTICLE 2
LIABILITIES AND INDEMNITY
-------------------------
2.1 Indemnity Liabilities of Seller and Indemnification by Seller.
-------------------------------------------------------------
Subject to Article 6 hereof and unless otherwise specifically provided for in
this Agreement or in writing by the parties, effective as of the Closing Seller
shall indemnify and hold harmless, Buyer and each and every affiliate of Buyer
and its and their respective directors, shareholders, partners, officers,
employees, agents, consultants, representatives, successors, transferees and
assigns from and against any and all claims, liabilities, obligations, losses,
costs, expenses, litigations, proceedings, damages or judgments (net of tax
benefits, as and when realized) (collectively, "Losses") incurred by Buyer, any
affiliate of Buyer and its and their respective directors, shareholders,
partners, officers, employees,
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<PAGE>
agents, consultants, representatives, successors, transferees and assigns (i)
relating to or arising from a breach of any of Seller's representations,
warranties or covenants contained in this Agreement or any Subsidiary Agreement,
(ii) of any kind and nature whatsoever (excluding Liabilities) related to or
arising from (A) the Assets, or (B) the Business, regardless of by whom or when
they are asserted, which arose or arise on or after or are pending at Closing,
to the extent that the facts on which they are based arose before the Closing,
whether or not they are known or unknown, fixed or contingent, secured or
unsecured, or asserted or unasserted (less any recovery from insurance, as and
when realized, other than self-insurance) or (iii) of any kind and nature
whatsoever related to or arising from (A) the Excluded Assets or (B) the
Excluded Liabilities, regardless of by whom or when they are asserted and
regardless of when the facts on which they are based arose, whether or not they
are known or unknown, fixed or contingent, secured or unsecured, or asserted or
unasserted (less any recovery from insurance, as and when realized, other than
self-insurance) (each, an "Indemnity Claim of Buyer"); provided, however, Buyer
shall not be entitled to any indemnification for an Indemnity Claim of Buyer
which (i) is expressly assumed by Buyer pursuant to and in accordance with
Article 1.4(b) of this Agreement, or (ii) is covered by the indemnity provisions
of Article 2.2 or (iii) is related to or arises from a breach of any of Seller's
representations, warranties or covenants contained in this Agreement or any
Subsidiary Agreement which is asserted after the Indemnification Deadline (as
defined in Article 6(b) hereof). Notwithstanding any provision to the contrary
in this Agreement, Buyer shall not be entitled to any indemnification under this
Article 2.1 for any Indemnity Claim of Buyer related to or arising from a breach
of any of Seller's representations or warranties contained in this Agreement
(other than Seller's representations and warranties contained in Articles
3.8(b), 3.9(a), 3.9(c) and 3.19 and in the last sentence of Article 3.24) which
is
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<PAGE>
individually less than $50,000 and unless and until all such Indemnity Claims of
Buyer in the aggregate shall be in excess of $500,000, in which case Buyer shall
then be entitled to indemnification for the amount up to three percent (3%) of
the Purchase Price that the aggregate of all such Indemnity Claims of Buyer
which are individually in excess of $50,000 exceed $500,000.
2.2 Indemnity Liabilities of Buyer and Indemnification by Buyer.
-----------------------------------------------------------
Subject to Article 6 hereof and unless otherwise specifically provided for in
this Agreement or in writing by the parties, effective as of the Closing Buyer
shall indemnify and hold harmless, Seller, Schering-Plough and each and every
affiliate of Seller and Schering-Plough and their respective affiliates and
directors, shareholders, partners, officers, employees, agents, consultants,
representatives, successors, transferees and assignees from and against: any and
all Losses incurred by Seller, Schering-Plough, and each and any affiliate of
Seller and Schering-Plough and their respective directors, shareholders,
officers, partners, employees, agents, consultants, representatives, successors,
transferees and assigns (i) related to or arising from a breach of any of
Buyer's representations, warranties or covenants con tained in this Agreement or
any Subsidiary Agreement, (ii) of any kind and nature whatsoever related to or
arising from (A) the Assets or (B) the Business, regardless of by whom or when
they are asserted, which arose or arise on or after the Closing, if the facts on
which they are based arose on or after the Closing, whether or not they are
known or unknown, fixed or contingent, secured or unsecured, or asserted or
unasserted (less any recovery from insurance, as and when realized, other than
self-insurance) or (iii) of any kind and nature whatsoever related to or arising
from any Liability regardless of by whom or when they are asserted and
regardless of when the facts on which they are based arose, whether or not they
are known or unknown, fixed or contingent, secured or unsecured, or asserted or
unasserted (less any recovery from insurance, as and when realized, other than
self-
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<PAGE>
insurance) (each, an "Indemnity Claim of Seller"); provided, however, Seller
shall not be entitled to any indemnification for an Indemnity Claim of Seller
which (i) is covered by the indemnity provisions of Article 2.1, (ii) is
expressly excluded by Seller pursuant to and in accordance with Article 1.3 of
this Agreement or (iii) is related to or arises from a breach of any of Buyer's
representations, warranties or covenants contained in this Agreement or any
Subsidiary Agreement which is asserted after the Indemnification Deadline.
Notwithstanding any provision to the contrary in this Agreement, Seller shall
not be entitled to any indemnification under this Article 2.2 for any Indemnity
Claim of Seller-related to or arising from a breach of Buyer's representations
or warranties contained in this Agreement (other than Buyer's representations or
warranties contained in Article 4.3) which is individually less than $50,000.
2.3 Indemnification Procedure.
-------------------------
(a) The indemnity provided for in Article 2.1 and Article 2.2
shall be governed by the procedure set forth in this Article 2.3; provided,
however, that if the party asserting indemnification (an "Indemnified Party")
shall notify the party against whom indemnification is asserted hereunder of an
Indemnity Claim of Buyer or an Indemnity Claim of Seller, as the case may be,
and if such claim can be cured by the payment of money, the assumption of a
liability or any other action (other than disclosure), then such party against
whom indemnification is asserted shall, at its sole option, have 60 days from
the receipt of notice, to cure or otherwise satisfy such claim, and upon so
doing shall have no further liability to the Indemnified Party hereunder with
respect to such claim. Failure to exercise such option shall not adversely
affect the rights or obligations of the party against whom indemnification is
asserted with respect to such claim.
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<PAGE>
(b) An indemnifying party's obligation under Article 2.1 or
Article 2.2 to indemnify any Indemnified Party is conditioned upon receipt from
the Indemnified Party of written notice of the assertion or institution of a
claim for which indemnification may be sought hereunder (a "Claim") promptly
upon such Indemnified Party becoming aware of such Claim; provided that the
failure to so notify an indemnifying party shall not relieve the indemnifying
party of its obligations hereunder except to the extent such failure shall have
prejudiced or harmed the indemnifying party. The party against whom
indemnification is asserted shall have the absolute right, in its sole
discretion and expense, to elect to defend, contest or otherwise protect against
any such Claim with legal counsel of its own selection. The Indemnified Party
shall have the right, but not the obligation, to participate, at its own
expense, in the defense thereof through counsel of its own choice and shall have
the right, but not the obligation, to assert any and all crossclaims or
counterclaims it may have. In respect of any third party claim, the Indemnified
Party shall, and shall cause its affiliates to, at all times cooperate in all
reasonable ways with, make its relevant files and records available for
inspection and copying by, and make its employees available or otherwise render
reasonable assistance to, the party against whom indemnification is asserted (i)
in its defense of any action for which indemnity is sought hereunder and (ii) in
its prosecution of any related claim, cross-complaint, counterclaim or right of
subrogation. In the event the party against whom indemnification is asserted
fails timely to defend, contest -- or otherwise protect against any such third
party suit, action, investigation, claim or proceeding, the Indemnified Party
shall have the right, but not the obligation, to defend, contest, assert
crossclaims or counterclaims or otherwise protect against the same. The party
against whom indemnification is asserted shall not be prohibited from settling
any claim or action subject hereto, unless such settlement will result in an
injunction against Seller or Buyer or
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<PAGE>
any of their respective affiliates, in which case the party against whom
indemnification is asserted shall not settle such claim or action unless the
Indemnified Party shall consent thereto, which consent shall not be unreasonably
withheld.
2.4 Subrogation. The party against whom indemnification is asserted
-----------
shall have the right to elect to be subrogated to the claims or rights of the
Indemnified Party as against any other persons with respect to any Loss by the
party against whom indemnification is asserted under this Article 2.4.
2.5 Exclusive Remedy. After the Closing, the indemnification expressly
----------------
provided in this Agreement shall be the sole and exclusive remedy for any breach
of representations and warranties or of any covenant or agreement in this
Agreement or any of the Subsidiary Agreements by either party.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller hereby represents, warrants and covenants to Buyer as follows:
3.1 Organization; Corporate Power. Seller is a corporation duly
-----------------------------
organized, validly existing and in good standing under the laws of the State of
New Jersey and has full corporate power and authority to enter into and perform
its obligations under this Agreement and the transactions contemplated hereby.
3.2 Due Authorization. The execution and performance by Seller and its
-----------------
affiliates, as the case may be, of this Agreement and the Subsidiary Agreements
and the performance of the transactions contemplated hereby and thereby have
been duly and validly authorized by Seller's Board of Directors and no further
corporate action of Seller, its shareholder or otherwise is required
-20-
<PAGE>
to be taken in order for Seller to execute, deliver and perform its obligations
hereunder or for Seller to cause the execution, delivery and performance of its
affiliates, obligations thereunder. Assuming the due execution by Buyer and its
affiliates, as the case may be, this Agreement is and, when executed, each of
the Subsidiary Agreements will be, a valid and binding obligation of Seller or
an affiliate thereof, as the case may be, enforceable against Seller or such
affiliate in accordance with its terms, except as may be limited by applicable
bankruptcy, insolvency or other similar laws affecting the rights of creditors
generally or as may be limited by the availability of equitable remedies,
including specific performance, subject to the discretion of the Court before
which any proceeding therefor may be brought.
3.3 Non-Contravention; Material Consents.
------------------------------------
(a) Except (i) as set forth on Schedule 3.3(a) hereto and (ii) for
---------------
those violations or conflicts the failure of which to cure will not have a
material adverse effect on the operations of the Business in the ordinary course
on the date hereof or which will not materially or adversely affect the ability
of Seller and its affiliates to perform fully all of its and their material
obligations, covenants, agreements and commitments contemplated under this
Agreement and the Subsidiary Agreements, none of the execution, delivery and
performance of this Agreement, the execution, delivery and performance of the
Subsidiary Agreements, the execution, delivery and performance of all other
agreements and documents to be executed or delivered pursuant hereto or thereto
and the consum mation of the transactions contemplated hereby or thereby, will:
(x) conflict with or result in any violation of or constitute a default under
any provision of the Certificate of Incorporation, By-Laws or other
organizational documents of Seller, any applicable affiliate thereof or any of
the Non-U.S. Subsidiaries; or (y) violate any provision of, or result in the
acceleration of or entitle any party
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<PAGE>
to accelerate (whether after the giving of notice or lapse of time or both) any
obligation under, or entitle any party to terminate any or all of the provisions
of, or result in the creation or imposition of any Lien (as defined in Article
3.8(b) hereof) upon any of the Assets or require the consent or approval of any
other party pursuant to any provision of any agreement or contract listed on
Schedule 3.15 hereto; or (z) violate, conflict with or require any consent under
- -------------
any material law, order, rule, regula tion, judgment or decree to or by which
Seller with regard to the Business is subject or bound which violation or
conflict would impair the ability of Seller to perform in all material respects
any of Seller's material obligations, covenants, agreements and commitments
contemplated by this Agreement.
(b) Except as set forth on Schedule 3.3(b) hereto, no authorization,
---------------
permit, consent, waiver, order, reissuance or approval of, or filing with, any
public body or authority or third party to any written contract, agreement,
arrangement, commitment or personal property lease listed or described on Part I
of Schedule 3.15 attached hereto is necessary for the consummation by Seller of
-------------
the transactions contemplated by this Agreement or the Subsidiary Agreements or
any agreements contemplated hereby or thereby, except for authorizations,
permits, consents, waivers, orders, reissuances or approvals the failure of
which to obtain would not (i) have a material adverse effect on the Business as
operated during the twelve month period ended December 31, 1994, taken as a
whole or (ii) prevent the consummation of the transactions contemplated by this
Agreement.
3.4 Financial Data. Schedule 3.4 sets forth an unaudited special purpose
-------------- ------------
balance sheet, an unaudited special purpose statement of cash flow and an
unaudited special purpose statement of profit and loss for the Business as of
and for the year ended December 31, 1994, including the basis of presentation
note thereto (the "Unaudited Special Purpose Financial Statements"). The
Unaudited
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<PAGE>
Special Purpose Financial Statements presents fairly the assets and liabilities
of W-J and the profit and loss of W-J, for the year then ended on the basis
stated in the basis of presentation note to the Unaudited Special Purpose
Financial Statements.
3.5 [Intentionally omitted]
3.6 Undisclosed Liabilities. Except as set forth on Schedule 3.6, there
----------------------- ------------
are no liabilities, guarantees or obligations of Seller of a nature required to
be included on a balance sheet (including the notes thereto) prepared in
accordance with generally accepted accounting principles relating to the
Business or the Assets which will be transferred -to or assumed by the Buyer at
the Closing other than those liabilities, guarantees or obligations which (i)
are reflected on the balance sheet forming part of the Unaudited Special Purpose
Financial Statements, (ii) arose since December 31, 1994 in the ordinary course
of business in a manner consistent with past business practices or (iii) are
Liabilities.
3.7 Real Property.
-------------
(a) Except for the Permitted Encumbrances, the Owned Facilities are
owned by Seller free and clear of all Liens in fee simple absolute.
(b) To the best knowledge of Seller, the existing use of each of the
Owned Facilities and the Leased Facility is a lawful permitted use and, in the
case of the Leased Facility, complies with all of the material terms of the
lease or tenancy agreement under which the Leased Facility is held and is not a
temporary use.
(c) All rent charges for the Leased Property have been paid or
accrued and no written notice of any material breach of any law, ordinance or
regulation affecting any of the Owned Facilities or the Leased Facility has been
received by Seller.
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<PAGE>
(d) Except as set forth on Schedule 3.7(d), to the best knowledge of
---------------
Seller, all of the buildings and structures on the Owned Facilities are
structurally sound with no material defects, are in adequate operating condition
and repair, normal wear and tear excepted, and are adequate for their current
use. In relying on the warranty and representation contained in this paragraph,
Buyer acknowledges that Seller has not sought or obtained professional advice
from any surveyor, architect, engineer or other appropriately qualified adviser.
(e) A true and correct copy of the lease and all amendments thereto
relating to the Leased Facility have been delivered to Buyer. Except as set
forth on Schedule 3.7(d), Seller has no knowledge that any of the buildings,
---------------
structures, improvements, fixtures and appurtenances is not in adequate
operating condition and repair, normal wear and tear excepted.
(f) To the best knowledge of Seller, Seller had not since January 1,
1992 released any "hazardous substances" (as such term is define under the
Comprehensive Environmental Response, Compensation and Liability Act, (42 U.S.C.
(S)(S) 9601, et sea.) ("Hazardous Substances") in, on or under the soil,
subsurface or groundwater of the owned Facilities or the Leased Facility.
(g) To the best knowledge of Seller, there are no underground storage
tanks at the Owned Facilities or the Leased Facility.
(h) Except for the representations made in the foregoing paragraphs
of this Article 3.7, Seller makes no representation as to the condition of the
Owned Facilities or the Leased Facility and, without limiting the generality of
the foregoing, Seller specifically makes no representation as the presence of,
or absence of, any Hazardous Substances in, on or under the Owned Facilities or
Leased Facility. Seller makes no representation as the suitability of the owned
Facilities or the
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<PAGE>
Leased Facility for any particular use other than the Business-as it is
currently being operated by W-J on the date hereof.
3.8 Tangible Personal Property; Title to Assets.
-------------------------------------------
(a) All tangible personal property included in the Assets and any
replacements thereof and/or improvements thereto are in good operating condition
and repair sufficient to enable Seller to operate the Assets in the ordinary
course of business in a manner consistent with past use.
(b) Upon consummation of the purchase and sale of all of the Assets
including, if applicable, the Non-U.S. Subsidiaries Shares, Seller shall
transfer, assign and deliver, or shall cause the transfer, assignment and
delivery of, good and marketable title, or, to the extent otherwise provided in
this Agreement, a valid and existing lease or license, to all of the Assets
(except that with respect to the Owned Facilities no representation or warranty
is made under this Article 3.8 as to whether title thereto is good or
marketable) and, if applicable, the Non-U.S. Subsidiaries Shares in each case
free and clear of any and all material liens, claims, security interests,
mortgages or other encumbrances (collectively, "Liens"), except for Liens for
taxes not yet due, liens disclosed on Schedule 3.8(b) hereof and Liens which in
---------------
the aggregate do not materially detract from the value of the Assets or
materially impair their current use.
3.9 Subsidiaries.
------------
(a) Schedule 3.9(a) sets forth, with respect to each of the Non-U.S.
---------------
Subsidiaries, its jurisdiction of incorporation or organization, and the number
of shares of each class of its capital stock (or other equity interests in such
entity) authorized, issued and outstanding. All of the issued and outstanding
shares of capital stock of (or other equity interests in) each of the Non-U.S.
Subsidiaries are owned by Seller or an affiliate thereof and have been duly
authorized and validly
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<PAGE>
issued, are, with respect to shares of capital stock (except for director's and
nominee or qualifying shares) fully paid and nonassessable and at the closing of
the transfer of any of such capital stock under this Agreement or any Subsidiary
Agreement, will be free and clear of any Liens. Any director's, nominee or
qualifying shares of capital stock of any Non-U.S. Subsidiary will, at any
closing of the transfer of such capital stock to Buyer, be free and clear of any
Liens and will be freely transferable to Buyer or its nominees, directors or
other designees.
(b) Each of the Non-U.S. Subsidiaries: (i) is a corporation or legal
entity duly organized and validly existing under the laws of its jurisdiction of
incorporation and (ii) is duly licensed, authorized or qualified to transact
business and is in good standing in each jurisdiction in which the nature of the
properties owned or leased by it, or the business conducted by it, makes such
licensing authorization or qualification necessary, except where a failure to be
so duly licensed, authorized or qualified or in good standing would not have a
material adverse effect on the business, financial condition or results of
operations of the Business, taken as a whole.
(c) Except as set forth on Schedule 3.9(c), at the time of the
---------------
closing of the transfer of any of the Non-U.S. Subsidiaries Shares under this
Agreement or any Subsidiary Agreement there will be no outstanding commitments
or obligations, options, warrants or rights of any kind to acquire or receive
any other shares of capital stock of (or other equity interests in) such Non-
U.S. Subsidiaries and there will be no outstanding securities or obligations
which are convertible into or exchangeable for (whether or not upon payment of
any consideration) any shares of capital stock of (or other equity interests in)
any of such Non-U.S. Subsidiaries.
(d) For purposes of Article 3.9(a) and 3.9(c) all references to the
Non-U.S. Subsidiaries shall exclude Wesley-Jessen (France).
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<PAGE>
(e) All tangible personal property owned by Wesley-Jessen (France)
and any replacements thereof and/or improvements thereto are in good operating
condition and repair sufficient to enable Wesley-Jessen (France) to operate such
personal property in the ordinary course of business in a manner consistent with
past use.
3.10 Raw Materials and Services; Absence of Interests in Suppliers or
----------------------------------------------------------------
Distributors. The Business is not experiencing any interruption in the supply
- ------------
of raw materials or services which has had or threatens to have any material
adverse effect on the Assets as they were operated during the year ended
December 31, 1994, taken as a whole.
3.11 Compliance with Laws. To the best of Seller's knowledge, the Business
--------------------
is being operated in all material respects in compliance with all material
applicable laws, statutes, ordinances, rules, regulations, orders and policies
in all jurisdictions in which the Assets are utilized, except where the failure
to do so would not have a material adverse effect on the Assets as operated
during the six-month period ended December 31, 1994, taken as a whole. No
governmental authority or agency has served notice that Seller (with respect to
the Business), the Business or the Assets were or are in violation of any law,
statute, ordinance, rule, regulation or order in any jurisdiction foreign or
domestic which would reasonably be expected to have a material adverse effect on
the Assets as operated during the six-month period ended December 31, 1994,
taken as a whole and, to the best knowledge of Seller, none of Seller (with
respect to the Business), the Business or the Assets are in violation of any
such law, statute, ordinance, rule, regulation, or order, which would result in
any material obligation, loss or expense to Buyer with respect to any of the
Assets from and after the Closing Date.
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<PAGE>
3.12 Permits and Licenses. Except as set forth on Schedule 3.12, to the
-------------------- -------------
best knowledge of Seller, all material governmental licenses, permits,
registrations, approvals, concessions, franchises and authorizations principally
employed in, or necessary to the ongoing conduct of, the Business as it is
conducted on the date hereof are in full force and effect (except for those
permits and licenses which relate to the utilization of the Assets and the
operation of the Business following the Closing which must be independently
applied for by Buyer after the Closing). Seller has not received written notice
from the appropriate governmental agency or authority that there are any
circumstances currently existing which would lead to any loss or refusal to
renew any such licenses, permits, registrations, approvals, concessions,
franchises and authorizations on terms less advantageous to Seller than the
terms of those licenses, permits, registrations, approvals, concessions,
franchises and authorizations currently in force.
3.13 Litigation, Claims and Proceedings. Except as set forth on Schedule
---------------------------------- --------
3.13, there are no lawsuits, actions, investigations, arbitrations, claims,
- ----
governmental proceedings or notices of violation, presently pending (except for
those pending as to which Seller has received no notice) or to the best
knowledge of Seller threatened against Seller (with respect to the Business),
the Business or the Assets or by which Seller (with respect to the Business),
the Business or the Assets is bound which would give rise to a Liability, except
for routine lawsuits, actions, investigations, arbitrations, claims, proceedings
or notices of violation in the ordinary course of business in which the amount
in controversy (including any punitive or special damages) does not exceed
$50,000 individually or $250,000 in the aggregate or which would not, in the
aggregate, have a material effect on the Assets as operated during the six month
period ended December 31, 1994, taken as a whole.
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3.14 Intellectual Property.
---------------------
(a) Schedule 3.14(a) lists all patents and registered designs (issued
----------------
and pending), trademarks (registered and pending), registered copyrights and
licenses granted by or to Seller (with respect to the Business) included in the
Assets relating to the Business (collectively, and together with the trade
secrets, unregistered copyrights, tradenames, trademarks which are used but not
filed and know-how of the Business which are Assets, referred to herein as the
"Intellectual Property").
(b) Except for applications pending, all of the patents, registered
designs, registered copyrights and trademarks listed in Schedule 3.14(a) have
----------------
been duly issued and all of the other Intellectual Property exists and is
subsisting in the name of Seller or an affiliate of Seller. All of the pending
patent applications listed on Schedule 3.14(a) have been duly filed in the
----------------
United States and/or foreign country, as indicated on said Schedule. Except as
set forth on Schedule 3.14(b) and except for oppositions which may have been
----------------
filed against pending trademarks, to the best knowledge of Seller, Seller has
not received any written notice of invalidity of or infringement of any material
rights of others by such Intellectual Property. Except as set forth on Schedule
--------
3.14(b), to the best knowledge of Seller, Seller has not received any notice of
- -------
any infringement by any third party with respect to the Intellectual Property.
(c) To the best knowledge of Seller and except for transfers from
Wesley-Jessen Corporation, a Delaware corporation ("Wesley-Jessen"), or any of
Seller's affiliates, to Seller, all assignments to Seller or any of its
affiliates of Intellectual Property have been recorded in all appropriate
offices to the extent required to vest ownership thereof in Seller or its
affiliates. Seller or an affiliate thereof owns the Intellectual Property free
and clear of all Liens.
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<PAGE>
3.15 Contracts. Part I of Schedule 3.15 lists as of the date hereof all
--------- -------------
written contracts (other than purchase orders and standard sales or consignment
contracts in the ordinary course of business), agreements, arrangements, and
commitments currently in effect which are principally used in, or required for
the ongoing conduct of, the Business which will be transferred to or assumed by
the Buyer pursuant to this Agreement or any Subsidiary Agreement, which by their
terms meet the criteria in the below specified paragraphs (copies of which have
previously been made available for review by Buyer) and which are not terminable
by their terms, by either party, without cost or penalty, upon ninety days, (or
less) notice:
(a) require future expenditures or receipts or other performance with
respect to goods or services having a value per annum in excess of
$100,000; or
(b) create relationships with distributors, dealers, manufacturer's
representatives or sales agencies; or
(c) contain commitments of suretyship or guaranty of the obligations
of third parties (except for guarantees or warranties provided by Seller in
respect of the Products in the ordinary course of business in a manner
consistent with past business practices); or
(d) contain an indenture, mortgage, pledge, credit (other than on
normal credit terms offered to customers in connection with the sale of the
Products) or other financing commitment for the borrowing or lending of
funds other than as reflected on the Unaudited Special Purpose Financial
Statements; or
(e) provide for any joint venture or partnership agreement with any
other person or entity; or
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<PAGE>
(f) create a contractual relationship with an independent third party
(other than a contractual relationship with an affiliate of Seller which is
cancelable at Closing) that to the best knowledge of Seller was not entered
into on an arm's-length basis.
Except as set forth on Part II of Schedule 3.15, to the best knowledge of
-------------
Seller, each of the above contracts, agreements, arrangements and commitments
listed in Part I of Schedule 3.15 are valid and in full force and effect and no
-------------
party thereto is in default of any material obligation there under or has given
notice of default to any other party thereunder. Except as set forth on Part II
of Schedule 3.15, Seller has not received notice that any party to such
-------------
contracts, agreements, arrangements, commitments and leases intends to exercise
any right to cancellation or termination thereunder or to exercise or not
exercise any option thereunder.
3.16 Absence of Material Adverse Change. Except as set forth on Schedule
---------------------------------- --------
3.16, since December 31, 1994, there has not been any material adverse change in
- ----
the Assets, taken as a whole.
3.17 Conduct of Business. Except as otherwise contemplated by this
-------------------
Agreement or set forth on Schedule 3.17, Seller has not, with respect to the
-------------
Assets or the Business, as applicable, since December 31, 1994: (i) except as
set forth on Part I of Schedule 3.15, made or entered into any contract or
-------------
commitment to which Buyer will be bound or liable after the Closing which would
be required to be listed on such Schedule in accordance with Article 3.15; (ii)
incurred any Liability, whether fixed or contingent, to which Buyer will be
bound or liable after the Closing, except in the ordinary course of business in
a manner consistent with past business practices; (iii) discharged or satisfied
any material Lien or paid any material Liability, whether fixed or contingent,
other than in the ordinary course of business and in a manner consistent with
past business practices or in accordance with the terms thereof; (iv) mortgaged,
pledged or subjected to Lien any of the Assets
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<PAGE>
other than as described on Schedule 3.8(b); (v) incurred, assumed, guaranteed or
---------------
became subject to or surety on any indebtedness or obligation relating to any
lending or borrowing or any other Liability unique to or primarily with respect
to the Business or the Assets to which Buyer will be bound or liable after the
Closing, except liabilities and commitments incurred in the ordinary course of
business in a manner consistent with past business practices; (vi) waived or
released any rights of material value to unaffiliated third parties with respect
to the Business; (vii) transferred, sold, granted, encumbered, assigned or
terminated any material rights (other than implied rights of use in customers
from the purchase of goods in the ordinary course of business) under any
material concessions, leases, licenses, agreements, patents, patent licenses,
inventions, trademarks, trade names, service marks, trade dress or copyrights,
or registrations or licenses thereof or applications therefor, or with respect
to any knowhow, trade secrets, or other proprietary or trade rights which are an
Asset; (viii) modified, changed, released or waived in any material respect or
terminated any contract listed on Part I of Schedule 3.15 attached hereto; (ix)
-------------
made any borrowing of money unique to the Assets or the Business to which Buyer
will be bound or liable after the Closing; (x) sold, discounted or otherwise
disposed of any accounts receivable, except in the ordinary course of business
in a manner consistent with past business practices; and changed its accounting
principles or policies.
3.18 [Intentionally omitted]
3.19 Broker's and Finder's Fees. Except for any fee which may be owing to
--------------------------
Merrill Lynch & Co., Inc., which served as financial advisor to Seller and its
affiliates in connection with this transaction, neither Seller nor its
affiliates are obligated to pay, or have retained any broker or finder or any
other person who is entitled to any broker's or finder's fee or any other
commission or
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<PAGE>
financial advisory fee based on any agreement or undertaking made by Seller or
any of its affiliates in connection with the sale of the Assets.
3.20 FDA and Related Matters. Schedule 3.20 sets forth a list of (i) all
----------------------- -------------
pending or approved IDEs, 510Ks, PMAs and similar foreign applications for the
products being investigated, developed, manufactured, sold or distributed by the
Business, and (ii) all other official and formal filings with the FDA or
applicable foreign regulatory agency, whether pending or approved, pertaining to
Products or their manufacturing site(s). Except as set forth on Schedule 3.20,
-------------
to the best of Seller's knowledge, all requirements of the Federal Food, Drug
and Cosmetic Act, as amended, and all applicable regulations promulgated
thereunder with respect to the filing and obtaining of approval or effectiveness
of all documents specified in clauses (i) and (ii) above and the filing of all
reports and data required to be filed or furnished to the FDA with respect to
the matters referred to in clauses (i) and (ii) above have been complied with in
all material respects.
3.21 Labor Relations and Employees. There is neither pending nor, to the
-----------------------------
best knowledge of Seller, threatened, any material strike, work stoppage, union
organization effort or campaign, or other material occurrence, event or
condition of a similar character in which the employees of the Business are
participating or have threatened to participate.
3.22 Employee Benefit Plans; Severance Policies. Seller has made available
------------------------------------------
to Buyer copies of, and Schedule 3.22 lists, all material written (i) employee
-------------
pension or welfare benefit plans and any trusts related thereto, (ii) bonus,
incentive or deferred compensation plans or programs or similar arrangements,
understandings or commitments, (iii) severance policies or arrangements and (iv)
other compensation policies, agreements, arrangements or understandings, in each
case that are maintained for the respective employees of W-J (other than routine
administrative procedures or
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<PAGE>
government-required programs) as to which Buyer would be subject to a material
expense following the Closing. Such material written plans are hereinafter
collectively referred to as the "Benefit Plans".
3.23 Taxes.
-----
(a) As of the Closing, all material returns, declarations, reports
and any other filings relating to Taxes (as defined in Article 3.23(b))
("Returns") required by applicable law to be filed prior to the Closing by
Wesley-Jessen or Seller, with respect to the Business, for all taxable periods
ended or ending on or before the Closing will have been filed, and all Taxes
lawfully required to be paid therefore before the Closing Date in respect of the
periods covered by such Returns will have been paid. Each Return filed (or to be
filed) pursuant to the preceding sentence was when filed and continues to be (or
will be, when filed) true, correct and complete in all material respects.
(b) The terms "Tax" and "Taxes" shall include all taxes, duties and
assessments imposed by any country, state, department, city, or other
jurisdiction (including without limitation income, excise, property, sales, use,
value added, withholding and franchise taxes, levies, imports, deductions,
charges, and customs duties) and all interest, additions to tax, tax repayment
supplements and penalties, charges and fees thereon or in respect thereof.
3.24 Insurance. The Assets are insured to the extent required by
---------
applicable law. All of the Assets and the assets of the Non-U.S. Subsidiaries
which are used in respect of the Business are insurable in accordance with
normal Schering-Plough business practices. To the best of Seller's knowledge
(based on Seller's knowledge of claims made in similar circumstances, i.e. in
purchase transactions in which the buyer assumed liability claims covered by
Seller's insurance) and based
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<PAGE>
on Seller's past experience in recovering under such policies, the three product
liability claims which are Liabilities set forth on Schedule 3.13 hereto
-------------
identified thereon as filed respectively by Deborah Basile, Linda Hoerner and
Peter Lazazzaro are fully insured Liabilities under policies of insurance
maintained by Seller or its affiliates, subject to applicable deductibles
thereunder, and will continue to be so insured thereunder following Closing,
which policies are, to the best knowledge of Seller, in full force and effect.
3.25 Accuracy of Statements. Subject to Article 5.13 and any supplemental
----------------------
Schedules provided pursuant to the provisions thereof, Seller's representations
and warranties contained in this Article 3 will be accurate in all material
respects at and as of the Closing with the same effect as though such
representations and warranties had been made at and as of the Closing except for
representations and warranties that speak as of a specific date or time other
than the Closing Date (which will be accurate in all material respects as of
such date or time).
ARTICLE 4
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
--------------------------------------------------
Buyer hereby represents, warrants and covenants to Seller that:
4.1 Organization, Corporate Power, Prior Activities. Buyer is a
-----------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has full corporate power and authority to enter
into and perform its obligations under this Agreement and the transactions
contemplated hereby.
4.2 Due Authorization; No Breach; Material Consents.
-----------------------------------------------
(a) The execution and performance by Buyer or its affiliates, as the
case may be, of this Agreement and the Subsidiary Agreements and the performance
of the transactions
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<PAGE>
contemplated hereby and thereby have been duly and validly authorized by Buyer's
Board of Directors and no further corporate action of Buyer, Buyer's
shareholders or otherwise is required to be taken by Buyer in order to execute,
deliver and perform its obligations hereunder or for Buyer to cause the
execution, delivery and performance of its affiliates, obligations thereunder.
Assuming due execution by Seller and its affiliates, as the case may be, this
Agreement is and, when executed, each of the Subsidiary Agreements will be, a
valid and binding obligation of Buyer or an affiliate thereof, as the case may
be, enforceable against Buyer or such affiliate in accordance with its terms,
except as may be limited by applicable bankruptcy, insolvency or other similar
laws affecting' the rights of creditors generally or as may be limited by the
availability of equitable remedies, including specific performance, subject to
the discretion of the Court before which any proceeding therefor may be brought.
(b) Except for those violations or conflicts, the failure of which to
cure will not materially and adversely affect the ability of Buyer or any
affiliate of Buyer to which any of the assets of the Non-U.S. Subsidiaries or
the Non-U.S. Subsidiaries Shares (if applicable) may be transferred to perform
fully all obligations, covenants, agreements and commitments under this
Agreement, none of the execution, delivery and performance of this Agreement,
the execution, delivery and performance of the Subsidiary Agreements, the
execution, delivery and performance of all other agreements and documents to be
executed or delivered pursuant hereto or thereto and the consummation of the
transactions contemplated hereby or thereby, will (i) conflict with or result in
any violation of or constitute a default under any provision of the Certificate
of Incorporation, By-Laws or other organizational documents of Buyer or any
affiliate of Buyer to which any of the assets of the Non-U.S. Subsidiaries or
the Non-U.S. Subsidiaries Shares (if applicable) may be transferred;
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<PAGE>
or (ii) violate, conflict with or require any consent under any material law,
order, rule, regulation, judgment or decree to or by which Buyer or such
affiliate is subject or bound which violation or conflict with or would impair
the ability of Buyer or such affiliate to perform in all material respects any
of their respective obligations, representations, warranties, covenants,
agreements and commitments contemplated by this Agreement. Except as set forth
on Schedule 4.2(b) hereto, no authorization, permit, consent, waiver, order,
---------------
reissuance or approval of, or filing with, any public body or authority or third
party is necessary for the consummation by Buyer or an affiliate of Buyer to
which any of the assets of the Non-U.S. Subsidiaries or the Non-U.S.
Subsidiaries Shares (if applicable) may be transferred of the transactions
contemplated by this Agreement or the Subsidiary Agreements or any agreements
contemplated hereby or thereby, except for authorizations, permits, consents,
waivers, orders, reissuances or approvals the failure of which to obtain would
not have a material adverse effect on the ability of Buyer or such affiliate to
consummate the transactions contemplated by this Agreement.
4.3 Broker's and Finder's Fees. Except as set forth on Schedule 4.3,
-------------------------- ------------
Buyer is not obligated to pay, and has not retained any broker or finder or
other person who is entitled to, any brokerage or finder's fee or any other
commission or financial advisory fee based on agreements or undertakings made by
Buyer in connection with the purchase of the Assets and the Business.
4.4 Hart-Scott-Rodino; International Filings. No filing or approval under
----------------------------------------
or other requirement pursuant to the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, is required in connection with or applicable to the
consummation of the transactions contemplated by this Agreement and the
Subsidiary Agreements.
ARTICLE 5
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<PAGE>
COVENANTS AND AGREEMENTS
------------------------
Seller and Buyer hereby covenant and agree as follows:
5.1 Conduct of Business. Except as otherwise contemplated by this
-------------------
Agreement or as set forth on Schedule 5.1, Seller agrees, with regard to the
------------
Business and the Assets, as applicable, from the date hereof until the Closing,
to: (i) maintain the Assets in good operating condition and repair consistent
with prior practices, except for fire, flood or other acts of God and (ii)
conduct the Business and utilize the Assets in the ordinary course of business
consistent with past practices. Except as se t forth on Schedule 5.1, Seller
------------
agrees, with regard to the Business and the Assets, as applicable, from the date
hereof until the Closing not to: (i) enter into any material contract or
commitment to which Buyer will be bound or liable after the Closing, except in
the ordinary course of business in a manner consistent with past business
practices; (ii) incur any material Liability, whether fixed or contingent to
which Buyer will be bound or liable after the Closing, except in the ordinary
course of business in a manner consistent with past business practices; (iii)
discharge or satisfy any material Lien or pay any material Liability, whether
fixed or contingent to which Buyer will be bound or liable after the Closing,
other than in the ordinary course of business and in a manner consistent with
past business practices or in accordance with the terms thereof; (iv) mortgage,
pledge or subject to Lien any of the Assets; (v) incur, assume, guarantee or
become subject to or surety on any indebtedness or obligation relating to any
lending or borrowing or any other material Liability unique to or primarily with
respect to the Business or the Assets to which Buyer will be bound or liable
after the Closing, except liabilities and commitments incurred in the ordinary
course of business in a manner consistent with past business practices; (vi)
waive or release any rights of material value to unaffiliated third parties with
respect to the Business; (vii) transfer,
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<PAGE>
sell, grant, encumber, assign or terminate any material rights (other than
implied rights of use in customers from the purchase of goods in the ordinary
course of business) under any material concessions, leases, licenses,
agreements, patents, patent licenses, inventions, trademarks, trade names,
service marks, trade dress or copyrights, or registrations or licenses thereof
or applications therefor, or with respect to any know-how, trade secrets, or
other proprietary or trade rights which are an Asset; (viii) modify, change,
release or waive in any material respect or terminate any contract listed on
Part I of Schedule 3.15; (ix) make any borrowing of money unique to the Assets
-------------
or the Business to which Buyer will be bound or liable after the Closing; (x)
except as set forth in Article 3.5, sell, discount or otherwise dispose of any
accounts receivable, except in the ordinary course of business in a manner
consistent with past business practices; (xi) change its accounting principles
or policies; (xii) cause any Non-U.S. Subsidiary (other than Wesley-Jessen
(France)) to distribute by dividend or to otherwise transfer to Seller or any
affiliate thereof any cash or cash equivalents borrowed under any credit
facility, of any kind, in contemplation of such distribution or transfer; and
(xiii) cause any Non-U.S. Subsidiary (other than Wesley-Jessen (France)) to
borrow cash or cash equivalents under any credit facility, except in the
ordinary course of business in a manner consistent with past business practices.
5.2 Access to Properties and Records.
--------------------------------
(a) To the extent permitted by law, from and after the date hereof
until the Closing, Seller will cooperate in permitting Buyer and its
representatives to make a full investigation of the Business and the Assets. To
the extent permitted by law, from the date hereof until the Closing, Seller will
afford, during regular business hours and upon reasonable notice, Buyer and its
representatives access to its offices, buildings, real properties, machinery and
equipment, inventory
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<PAGE>
and supplies, records, files, books of account, agreements and commitments,
corporate record books and stock books and personnel to the extent they relate
directly to the Business and the Assets. Seller will use reasonable efforts to
furnish to Buyer and its representatives all such further information concerning
the Business and the Assets as Buyer or such representatives may reasonably
request or which may be required in connection with obtaining necessary
consents, approvals, authorizations, transfers, permits, waivers, reissuances,
or orders of (or making necessary registrations or filings with) courts,
governmental agencies or bodies or other third parties which are required in
connection with the purchase of the Assets provided for herein and the
transactions contemplated hereby. Any information obtained through access to
books and records hereunder shall be expressly subject to the confidentiality
provisions of Article 12.2 hereof.
(b) Notwithstanding anything to the contrary in this Agreement,
Seller and Buyer agree that Buyer's access to competitively sensitive
information regarding the Business and the Assets shall be made subject to rules
and procedures to be agreed upon by outside counsel. Such rules and procedures
may, depending upon the circumstances, restrict certain persons from access to
the information, limit the dissemination of such information or require that
dissemination of information be made by, through or in the presence of outside
counsel.
(c) Seller shall retain after the Closing such records relating to
the Business and the Assets as Seller reasonably shall request of Buyer or as
Seller shall be required to retain in its direct possession by any law or
governmental regulation and, to the extent that such records relate to the
Business or the Assets shall, if requested by Buyer, promptly provide Buyer and
its representatives with copies thereof.
-40-
<PAGE>
(d) Buyer agrees to hold all of the books and records of the Business
delivered or made available to Buyer at the Closing and not to destroy or
dispose of any thereof for a period of seven years from the Closing Date or such
longer time as may be required by law, unless legally required to dispose of or
destroy such documents sooner. Seller and its representatives may at any time
during regular business hours, upon reasonable notice, inspect and make copies
of any of such records for tax or regulatory purposes or for purposes of
compliance with any law or defense or prosecution of any litigation,
investigation, arbitration, proceeding, notice of violation or other claims.
5.3 Required Consents and Filings; Further Assurances.
-------------------------------------------------
(a) Promptly after the execution hereof, Seller and its affiliates,
as necessary, and Buyer and its affiliates, as necessary, shall each use their
respective reasonable commercial efforts to seek all consents, approvals,
transfers, permissions, waivers, orders, reissuances or authorizations from (and
make all necessary filings or registrations with) all courts, governmental
agencies and bodies and other third parties which are required in connection
with the consummation of the transactions contemplated by this Agreement, the
Subsidiary Agreements or any agreements contemplated hereby or thereby.
(b) At any time and from time to time after the Closing, the parties
agree to cooperate with each other, to execute and deliver such other documents,
instruments of transfer or assignment, files, books and records and do all such
further acts and things as may be reasonably required to carry out the intent of
the parties hereunder.
(c) If the assignment of any patent, copyright, trademark or service
mark or any registration or application for the foregoing provided for herein
shall be declared invalid by any
-41-
<PAGE>
governmental agency or instrumentality or by any court, or it shall be
undesirable, impractical or impossible to accomplish such assignment pursuant to
and in accordance with the laws or administrative procedure of any jurisdiction,
then Buyer or its designee shall be deemed to have been granted an exclusive and
irrevocable paid-up license in and to the use of such patent, copyright,
trademark or service mark. Further, Seller will cooperate with Buyer in the
maintenance of such patent, copyright, trademark or service mark, at no cost to
Seller.
(d) Each party will promptly make such filings with the appropriate
European Union competition authorities and such other labor or regulatory
authorities as it determines on advice of counsel are required in order to
consummate the transactions contemplated by the Subsidiary Agreements.
5.4 Employment Offers; Benefits.
---------------------------
(a) Buyer will offer employment, commencing on the Closing Date, to
all salaried and hourly employees employed by the Business (including all U.S.
employees and employees of the Non-U.S. Subsidiaries) on the day before the
Closing Date (the "Employees"), at salary or compensation levels and upon terms
and conditions substantially comparable to those in effect immediately prior to
Closing and with medical and pension benefits to be determined by Buyer. For
the purposes of this Article 5.4, any Employee on short-term disability,
vacation, leave of absence with a definite date of return or lay-off shall be
considered offered employment. Except to the extent specifically provided
otherwise in this Section 5.4, Buyer will assume and be responsible for all
liabilities and obligations with respect to, and claims of, the Employees,
whether incurred, claimed or accrued before or after the Closing, including,
without limitation, all employee compensation, benefit, retirement or
termination obligations and claims, it being understood that Buyer shall not
-42-
<PAGE>
assume any such liabilities or obligations of the Employees which were incurred,
claimed or accrued prior to the Closing Date with respect to any such amount (i)
which is covered by insurance maintained by Seller, (ii) which is funded by a
trust maintained by Seller (unless trust assets have been transferred to Buyer
pursuant hereto), (iii) which arises under Seller's retiree medical or life
insurance plan, (iv) which arises under the incentive or stock based
compensation programs maintained by Seller, or (v) which arises under a
nonqualified deferred compensation plan maintained by Seller. Buyer shall give
the Employees credit for service with Seller on the same basis as service with
Buyer for purposes of all employee benefit plans, programs and policies in which
they participate.
(b) Buyer shall not, at any time prior to or on the Closing Date,
issue any announcement or make any representation that the employment of any of
the Employees will be terminated or amended to the detriment of any Employee on
or after the Closing. In addition, Buyer shall not, at any time on or after the
Closing Date, take any action that would cause Seller to incur any liability for
a "mass layoff" or "plant closing" under the U.S. Worker Adjustment and
Retraining Notification Act ("WARN") with respect to any terminations of the
employment of any persons who were formerly employed by the Business, which
terminations occurred before the Closing Date and did not constitute such a
"mass layoff" or "plant closing" at any time prior to the Closing Date. To
avoid any doubt and without limiting any right of Seller to indemnification
under Article 2.2 of this Agreement, Buyer agrees that except to the extent
specifically provided for in this paragraph, it shall be responsible for, shall
indemnify and hold harmless Seller, Schering-Plough, and their affiliates, and
their respective directors, shareholders, officers, employees, agents,
consultants, representatives, successors, transferees and assigns, from and
against any amounts payable or other Losses incurred
-43-
<PAGE>
as a result of the termination of employment (whether actual or constructive) of
any Employee at or after the Closing, including without limitation pursuant to
WARN (whether payable to or in respect of individuals terminated before, on or
after the Closing Date). Buyer shall, at its option, continue for a period of
time as it deems appropriate in its own circumstances, the severance program
maintained by Seller immediately prior to the Closing Date, which is set forth
on Schedule 5.4 (the "Severance Program"). Seller agrees to pay (i) if clause
------------
(ii) below is inapplicable, as soon as reasonably practicable to Buyer as a
reimbursement or (ii) if Buyer has delivered to Seller a written statement
setting forth in reasonable detail the amount of any such obligation or
liability, the basis and calculation thereof, and the date such obligation or
liability is to be incurred at least five Business Days prior to the date such
obligation or liability is incurred, on the date such obligation or liability is
incurred by wire transfer of immediately available Federal Reserve funds to the
account(s) of Buyer specified in such statement, any and all obligations and
liabilities arising under the Severance Program (or, with respect to non-U.S.-
based Employees, on the same basis and only to the same extent as provided under
the Severance Program) with respect to U.S.-based Employees and up to 25 non-
U.S.-based Employees terminated within the period beginning on the Closing Date
and ending on December 31, 1995 (the "Severance Period"), but only to the extent
that the number of such Employees, plus a number equal to 1182 less the number
of full-time, non-temporary employees of the Business employed thereby as of
immediately prior to the Closing Date, minus the number of individuals hired by
Buyer on a full-time, non-temporary basis within the Severance Period to fill
positions vacated by reason of voluntary termination since February 28, 1995 and
prior to the Closing Date, does not exceed 425.
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<PAGE>
(1) Buyer and Seller agree to cooperate in making all appropriate filings
and taking all appropriate actions required to implement the provisions of this
Section. As soon as practicable following the Closing, Buyer shall establish a
defined benefit pension plan (the "Successor Retirement Plan") comparable to the
Schering-Plough Corporation Retirement Plan, as in effect as of the Closing Date
(the "Retirement Plan") which shall be qualified under Section 401 of the
Internal Revenue Code of 1986, as amended (the "Code"), and a trust (the
"Successor Trust") which is exempt under Section 501 of the Code, to which the
transfer provided for below in this Section 5.4(c) shall be made. The transfer
specified below shall take place as soon as practicable after Buyer has
furnished Seller with a copy of the IRS determination letter and, to the extent
applicable, a determination letter of the Puerto Rico tax authorities, stating
that the Successor Retirement Plan qualifies under Section 401(a) of the Code
and that the trust with respect to the Successor Retirement Plan qualifies under
Section 501(a) of the Code; but in no event before the 180th day after the
Closing Date. Subject to the foregoing provisions of Section 5, Seller shall
cause to be transferred from the Retirement Plan to the Successor Retirement
Plan liabilities with respect to the Employees who are participants in the
Retirement Plan as of the Closing Date and who remain employed by Buyer on
January 1, 1996, and assets with respect to such liabilities equal to the
accumulated benefit obligation ("ABO"), as determined under Financial Accounting
Standards ("FAS") 87 and, to the extent applicable, FAS 88 as of the Closing
Date, plus interest thereon at the rate of 7% per annum from the Closing Date
through the date of the transfer, but no less than the minimum amount necessary
to satisfy the requirements of Section 414(l) of the Code and the regulations
promulgated thereunder. The ABO shall be
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determined in accordance with FAS 87 and, to the extent applicable, FAS 88 and
shall be based on the actuarial assumptions set forth in Schedule 5.4(c)(1)
------------------
attached hereto. The ABO shall be determined by an actuary selected by Seller.
(2) Buyer shall cause one or more defined contribution plans sponsored by
Buyer to accept rollover contributions by Employees of any amounts distributed
to them from the Schering-Plough Employees, Profit-Sharing Incentive Plan, the
Schering-Plough Employees, Savings Plan, and the Schering-Plough Puerto Rico
Employee's Retirement Savings Plan, to the extent permitted by law. At such time
that Seller declares or determines contributions to the Schering-Plough
Employees, Profit-Sharing Incentive Plan and the Schering-Plough Puerto Rico
Employees Retirement Savings Plan on behalf of its employees for the 1995 plan
year, Seller shall contribute to such plans on behalf of each Employee an amount
equal to a portion of the contribution that would have been made for each
Employee with respect to such plan year based on the compensation earned as of
the Closing Date and assuming for such purposes that each such Employee had
otherwise satisfied all eligibility conditions for such contribution. At such
time that Seller or its affiliates declare or determine cash bonuses under The
Christmas/Profit-Sharing Bonus Program for Seller's employees in Puerto Rico for
calendar year 1995, Seller shall pay to the Employees based in Puerto Rico a
portion of the bonuses that would have been paid to such Employees for 1995
based on the compensation earned as of the Closing Date and assuming for such
purposes that each such Employee had otherwise satisfied all eligibility
conditions for such bonus.
(3) All transferred Employees who would be eligible to receive Post
Retirement Medical Benefits under the Schering-Plough Retirees, Medical Plan
(including life insur-
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ance) (the "Retirees, Plan") if they retired as of the Closing Date shall
continue to be eligible to receive benefits under the Retirees' Plan upon
retirement from employment with the Buyer or any successor thereto to the
extent such benefits remain available to the Seller's retirees who are
similarly situated, under the same terms and conditions as applicable to
Seller's retirees. If Buyer, or any successor thereto, offers a Post
Retirement Medical Benefits Plan to its employees, then any benefits
offered herein under the Retirees' Plan shall be secondary and the Buyer's
or successor's plan shall be primary as to benefit payments.
(c) with respect to all Benefit Plans ("Non-U.S. Plans") covering
Employees not based in the United States ("Non-U.S. Employees"), the following
principles shall apply. All liabilities and assets of Non-U.S. Plans covering
only Non-U.S. Employees shall be transferred to Buyer as of the Closing. With
respect to all other Non-U.S. Plans there shall be no transfer of assets or
liabilities to Buyer unless otherwise required by law.
5.5 Bulk Sales Law. Buyer waives compliance by Seller with the provisions
--------------
of any Bulk Sales Law, including without limitation, the bulk transfer
provisions of the Uniform Commercial Code of any state, or any similar statute,
if and to the extent applicable to the transactions contemplated by this
Agreement, and Seller shall indemnify and hold harmless Buyer from and against
any cost, expense or liability resulting from such waiver by Buyer.
5.6 Title Insurance and Surveys.
---------------------------
(a) Promptly upon execution of this Agreement, Buyer shall order and
update from time to time prior to the Closing (at the cost and expense of Buyer)
title commitments (as amended or updated from time to time, the "Title
Commitments") for the owned Facilities issued by a nationally recognized title
company (the "Title Company"). Seller shall provide for the delivery
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of such executed and acknowledged affidavits and/or indemnification agreements
as the Title Company shall reasonably require in order to omit from its title
insurance policies relating to the Owned Facilities all exceptions (other than
Permitted Encumbrances) for (i) judgments, bankruptcies or other returns against
persons or entities whose names are the same as or similar to Seller's or an
affiliates, (ii) mechanics, and materialmen's liens, and (iii) encumbrances
(other than Permitted Encumbrances) first appearing in the public records after
the Closing Date but prior to the date the documents transferring the Owned
Facilities to Buyer are recorded. If a Title Commitment or update shall reveal
one or more defects to title not included as Permitted Encumbrances (the
"Unpermitted Encumbrances"), Buyer shall promptly notify Seller of such
Unpermitted Encumbrances and Seller shall (i) cure such Unpermitted Encumbrances
which can be cured with the payment of a commercially reasonable amount of money
only ("Monetary Defects") prior to Closing and (ii) use reasonable efforts to
cure the Unpermitted Encumbrances which cannot be so cured ("Non-monetary
Defects") prior to Closing. If Seller is unable to cure the Non-monetary Defects
prior to Closing, Buyer shall consummate the transactions contemplated by this
Agreement, including, without limitation, the acquisition of the particular
Owned Facility affected by the Non-monetary Defects with no adjustment to the
Purchase Price, and such Non-monetary Defects shall be deemed to be Permitted
Encumbrances.
(b) Seller shall deliver to Buyer and the Title Company, copies of
any maps or plats of an as-built survey of the sites of the Owned Facilities
which Seller has in its possession.
5.7 Environmental Matters.
---------------------
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(a) Seller agrees to respond to, or to remediate, to the extent
mandated by law, Hazardous Substances discovered in, on or under the owned
Facilities under the following conditions:
(i) The concentration or amount of Hazardous Substances discovered
exceed any applicable groundwater, surface water, or soil quality standard
or any other applicable concentration or amount above which a response or
remediation is mandated by applicable federal, state, commonwealth or local
law ("Action Levels");
(ii) Buyer provides Seller with written notice of the discovery of
such Hazardous Substances (the "Remediation Notice") in excess of the
Action Levels on or prior to the date that is ninety (90) days subsequent
to the Closing Date;
(iii) The Remediation Notice shall include, at a minimum, the identity
of the professional or consulting firm who determined the presence of
Hazardous Substances, a report from such professional or consulting firm
describing in detail the investigation conducted, samples taken and
laboratory analyses performed, all laboratory data from a labo ratory that
is certified by the applicable federal, state or commonwealth agency to
perform the analyses conducted, and a written conclusion from a qualified
professional or consulting firm that the Hazardous Substances in, on or
under the Owned Facilities exceed the Action Levels;
(iv) Seller shall have the right to commission at its own cost and
expense a professional or consulting firm to review the Remediation Notice
and to perform its own tests to determine the concentration or amount of
Hazardous Substances which Buyer contends are present in, on or under the
Owned Facilities on or prior to the date which is
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ninety (90) days subsequent to the date Seller receives the Remediation Notice.
If based on such review and/or testing Seller disagrees with one or more of the
conclusions set forth in the Remediation Notice, Seller shall deliver to Buyer a
notice of such disagreement (the "Remediation Response Notice") within such
ninety (90) day period. The parties agree to negotiate in good faith the extent
of the Hazardous Substances, if any, which may be present in, on or under the
Owned Facilities. If the parties cannot reach agreement on the extent of the
Hazardous Substances, if any, which may be present in, on or under the Owned
Facilities within sixty (60) days of the date Buyer receives the Remediation
Response Notice, then the issue shall be resolved by arbitration in accordance
with the rules then in effect of the American Arbitration Association. Any
arbitration pursuant to this Article 5.7(a)(iv) shall take place in New York
City before a single arbitrator agreeable to both parties. If the parties cannot
agree on a single arbitrator within thirty (30) days from the expiration of the
sixty (60) days period described above, then the arbitration shall be conducted
by three (3) arbitrators, one (1) of whom shall be selected by each party, and
the third of whom shall be selected by the other two (2) arbitrators. Any
determination pursuant to such arbitration shall be binding on the parties; and
(v) The extent of the response or remediation required by Seller pursuant
to this Article 5.7(a) shall not exceed the work described in Article 5.7(b)
below; and
(vi) Except to the extent mandated by federal, state, commonwealth or local
law, as applicable, Buyer shall not notify, report or otherwise describe the
presence of the Hazardous Substances to any federal, state or commonwealth
agency or comment upon, or otherwise communicate to any governmental body with
respect to, the response or remedial
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effort conducted or to be conducted by Seller; provided, however, that
Buyer may take such action as is reasonably necessary under the
circumstances to respond to an actual or threatened emergency or imminent
endangerment situation arising from the presence of Hazardous Substances.
(b) In the event that Seller is obligated to respond to or to
remediate Hazardous Substances pursuant to Article 5.7(a) above, then Seller
shall be obligated to perform such work as soon as reasonably practicable, but
only to the extent necessary to obtain the approval of or otherwise satisfy the
requirements of, the applicable federal, state, commonwealth or local agency or
agencies. In determining the extent of the response or remedial effort required
by Seller under this Article 5.7, Seller shall be entitled to assume, and to
rely upon the fact that, the Owned Facilities will be utilized in accordance
with the type and extent of use of such properties as of the Closing Date.
Seller shall not be obligated to perform response or remedial work necessary for
additional uses or for changes in, or expansions of, the Owned Facilities as of
the Closing Date.
(c) Following the Closing, Seller shall not unreasonably interfere
with the operations of the Owned Facilities or the Leased Facility in the event
Seller is obligated to respond to or remediate Hazardous Substances. Seller
shall keep Buyer reasonably apprised of material facts and events with respect
to Seller's response to or remediation of Hazardous Substances.
5.8 Restrictions on Transfer of Assets.
----------------------------------
(a) In the event that any of the transactions contemplated under any
Subsidiary Agreement cannot be consummated at or before the Closing as a result
of the failure to receive government or third party consents, approvals,
authorizations or waivers required for the transfer of Non-U.S. Subsidiaries
Shares or assets of Wesley-Jessen (France), as the case may be, the Non-U.S.
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Subsidiaries Shares or assets of Wesley-Jessen (France) so affected shall not be
sold, assigned, transferred, conveyed or delivered at the Closing, but instead
shall be covered by the provisions of this Article 5.8. Any such occurrence will
not relieve Buyer or Seller of its obligations to close under this Agreement nor
Buyer's obligation to pay the Purchase Price.
(b) From and after the Closing hereunder, except as set forth in this
Article 5.8(b), (i) Seller shall cause the Non-U.S. Subsidiaries Shares or
assets of Wesley-Jessen (France) which cannot be conveyed for any of the reasons
described in Article 5.8(a), to be beneficially held for the Buyer at its
expense, with all profits from the operations thereof being remitted thereto as
soon as reasonably practicable, and (ii) subject to any constraints or
limitations imposed by applicable law or regulations, Buyer or Buyer's designee
(which designee shall be reasonably acceptable to Seller) shall at the cost and
expense of Buyer operate, or cause to be operated, the business with respect to
such Non-U.S. Subsidiaries Shares and assets of Wesley-Jessen (France) until the
Non-U.S. Subsidiaries Shares or assets of Wesley-Jessen (France) can be conveyed
or the expiration of a period of twenty-four (24) months (or such longer period
or periods of time as the parties shall mutually agree with respect to any
particular Non-U.S. Subsidiaries Shares or assets of Wesley-Jessen (France))
from the Closing hereunder, whichever first occurs. The Buyer shall indemnify
and hold harmless Seller against any and all Losses incurred by Seller or its
affiliates in connection with this Article 5.8, and Seller shall have no
obligation to provide any funds or incur any expense in connection herewith.
Buyer and Seller shall promptly use all reasonable efforts to resolve all
impediments to transfer of the Non-U.S. Subsidiaries Shares or assets of Wesley-
Jessen (France), and will cooperate for this purpose and, if the relevant
impediment is common to both Buyer and Seller, shall share (in accordance with
local custom and practice) all costs and expenses in
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connection therewith. Upon resolving the impediment to transfer of such Non-U.S.
Subsidiaries Shares or assets of Wesley-Jessen (France), Seller and Buyer shall
promptly consummate, or cause to be consummated, the transactions contemplated
in any Subsidiary Agreement with respect to such Non-U.S. Subsidiaries Shares or
assets of Wesley-Jessen (France). If such impediments have not been resolved on
or before twenty-four (24) months (or such longer period or periods of time as
the parties shall mutually agree with respect to any particular Non-U.S.
Subsidiaries Shares and assets of Wesley-Jessen (France)) following the Closing
hereunder, then subject to any constraints or limitations imposed by applicable
law or regulations, Seller or its affiliates, as the case may be, or the
appropriate Non-U.S. Subsidiary following the Closing, shall continue to hold,
or cause to be held, title to such Non-U.S. Subsidiaries Shares and assets of
Wesley-Jessen (France) and Buyer or Buyer's designee, as the case may be, shall
cease to operate, or cause to be operated, the business with respect to such
Non-U.S. Subsidiaries Shares and assets of Wesley-Jessen (France). At such time
the parties shall mutually agree upon the value of the applicable Non-U.S.
Subsidiaries Shares and assets of Wesley-Jessen (France) that still cannot be
transferred (the "Value"). If the parties cannot mutually agree upon the Value
within thirty (30) business days, then such Value shall be promptly determined
by an independent third party appraiser reasonably agreeable to both Buyer and
Seller. Any determination of the Value by such ap praiser shall be binding upon
the parties. Buyer shall be entitled to receive from Seller within ten (10)
business days of the determination thereof, the Value, which amount shall be in
cash, payable in United States dollars (or in local currency if payment in
United States dollars is prohibited).
(c) Nothing in this Article 5.8, the Subsidiary Agreements or any
agreements contemplated hereby or thereby shall require either party hereto to
accept any conditions or make
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any agreements with any third party in order to obtain the approval of, or
waiver of rights by, such third party as contemplated by this Article 5.8 if
such party reasonably believes such conditions or agreements are materially
adverse to it.
5.9 Insurance.
---------
(a) To the extent that (i) there are third-party insurance policies
maintained by the Seller or its affiliates ("Seller's Policies") covering any
Loss relating to the Assets, Liabilities, Products, operations and employees of
the Business (all such Losses are referred to in this Article 5.9 as the
"Insured Liabilities") and relating to or arising out of occurrences prior to
the Closing, and (ii) Seller's Policies by their terms continue after the
Closing to permit claims with respect to such Insured Liabilities ("Insured
Claims") to be made relating to occurrences prior to the Closing, Seller agrees
to cooperate with the Buyer and use reasonable efforts in submitting Insured
Claims on behalf of the Buyer under Seller's policies with respect to such
Insured Liabilities.
(b) To the extent Seller incurs any out-of-pocket costs and expenses
(including retroactive premiums under the Seller's Policies) (i) as a result of
Insured Claims under the Seller's Policies by or at the request of Buyer or (ii)
otherwise allocable under the Seller's Policies to the Business or the Insured
Liabilities (other than premium increases not associated with an Insured Claim),
Buyer will promptly upon receipt from Seller of a statement of the amount of
such costs and expenses with a reasonably detailed breakdown of such costs and
expenses, reimburse the Seller therefor. Seller shall cooperate in enabling and
use reasonable efforts to enable Buyer to submit such Insured Claims to the
Schering-Plough Risk Management and Insurance Department for processing and
handling of claims with Seller's insurer.
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(c) Except for the express obligations set forth in this Article 5.9,
nothing herein shall create any obligation on the part of Seller or any of its
affiliates to provide any insurance coverage for any Loss of Buyer or the
Business.
5.10 Return Preparation; Tax Payments.
--------------------------------
(a) Seller shall be responsible for preparing and timely filing all
Returns relating to the Business for taxable periods ending on or before the
Closing Date. Buyer shall be responsible for preparing and timely filing all
Returns relating to the Business for taxable periods ending after the Closing
Date. Each party shall provide the other party with reasonable assistance,
information, documentation, working papers and schedules relating to the
Business reasonably requested by such other party in connection with its
preparation and filing of any Return it is required to file.
(b) With respect to each Non-U.S. Subsidiary (other than Wesley-
Jessen (France)), Seller shall be responsible for the timely payment of Taxes
relating to any period (or any portion thereof) ending on or before the Closing
Date, and Buyer shall be responsible for the timely payment of Taxes relating to
any period (or any portion thereof) beginning after the Closing Date, determined
where relevant by a closing of the books on the Closing Date.
(c) Notwithstanding any other provision herein to the contrary,
Seller shall be responsible for, and shall indemnify Buyer with respect to, any
Tax liability imposed as a result of Seller or any affiliate of Seller being a
member of an affiliated group, under the provisions of Section 1502 of the Code
and regulations promulgated thereunder (or any corresponding provisions of
state, local, or foreign Tax law).
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5.11 Examinations.
------------
(a) Each party shall be responsible for handling all audits and
examinations of any Return which such party is responsible for preparing and
filing pursuant to Article 5.10. Seller and Buyer agree to afford full and
timely cooperation to one another and to their respective representa tives, if
any, in any audit, administrative or judicial proceeding involving (i) any
Return filed or required by this Agreement to be filed for any period, or (ii)
any item or issue affecting Seller or Buyer's potential liability hereunder or
to any Tax authority.
(b) Seller shall promptly notify Buyer of any communication with any
Tax authority which may affect any item of income, gain, loss, deduction of
credit of Buyer or its affiliates (the "Buyer Group"). To the extent that any
issue arising in any proceedings involving Tax liability could increase the
liability of the Buyer Group for any Taxes, Seller shall permit Buyer to
participate (at its own expense) in such proceedings, and Seller shall not,
without the prior written consent of Buyer, which shall not be unreasonably
withheld, compromise or settle such issue in a manner which could increase the
liability of the Buyer Group for any Taxes.
5.12 Financing. Buyer will use its reasonable best efforts to obtain the
---------
purchase price financing needed to effect the transaction contemplated by this
Agreement and the Subsidiary Agreements (the "Financing") on commercially
reasonable terms and to deliver to Seller as soon as reasonably practicable, but
in no case later than June 2, 1995, after the date hereof executed customary
commitment letters and letters setting forth the equity commitment required
under the aforementioned commitment letters from responsible financial
institutions for the Financing reasonably satisfactory to Seller (collectively,
the "Financing Documentation"). In the event that any portion of the Financing
becomes unavailable, regardless of the reason therefor, Buyer will use
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its reasonable best efforts to obtain alternative financing from other sources
on and subject to substantially the same terms and conditions as the portion of
the Financing that has become unavailable. Buyer shall use its reasonable best
efforts to (i) satisfy on or before the Closing all requirements of the
definitive agreements pursuant to which the Financing will be obtained (the
"Financing Agreements") which are conditions to closing all transactions
constituting the Financing and to drawing down the cash proceeds thereunder;
(ii) defend all lawsuits or other legal proceedings challenging the Financing
Agreements or the consummations of the transactions contemplated thereby; and
(iii) lift or rescind any injunction or restraining order or other order
adversely affecting the ability of the parties to consummate the transactions
contemplated thereby. Notwithstanding the foregoing, Buyer shall not be required
to pay costs and expenses in connection with arranging the Financing materially
in excess of the costs and expenses contemplated by the Financing Documen tation
or agree to financing terms that differ in a manner materially adverse to Buyer
or any of its affiliates from those contemplated by the Financing Documentation.
5.13 Schedule Supplements. Seller may, prior to the Closing Date, by
--------------------
written notice to Buyer, supplement any Schedule to reflect any change or event
that occurs after the date of this Agreement or to otherwise correct or amend
any such Schedule. No such supplemental Schedules shall be deemed to cure any
breach of any of Seller's representations or warranties for purposes of the
first sentence of Article 8(a) with respect to representations and warranties
made as of the date hereof, but, if the Closing occurs, from and after the
Closing, any such supplemental Schedule will be effective to cure and correct
any breach of any such representation or warranty for all purposes (including
without limitation Article 2 hereof) which would have existed by reason of
Seller not having made such supplement.
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5.14 Collection of Receivables. During the period from the Closing Date
-------------------------
through and including the Audit Date, Buyer shall use all commercially
reasonable means to collect cash from customers on accounts receivable that
relate to product shipments that occurred on or prior to the Closing Date.
5.15 Transitional Assistance. Prior to Closing, Seller and Buyer shall
-----------------------
negotiate in good faith a transitional services agreement (the "Transitional
Services Agreement") for the post-Closing provision of services by Seller and
its affiliates in connection with the post-Closing conduct of the Business by
Buyer and its affiliates, which services shall include provision of the services
(at the rates indicated) set forth on Schedule 5.15 hereto and which services
-------------
shall be provided at a reasonable cost mutually agreed upon by Seller and Buyer
and shall not be free.
5.16 Resale Certificate. Buyer shall execute and deliver to Seller on or
------------------
before the Closing a resale certificate relating to the payment of sales tax
under Illinois law and satisfactory for Seller's purposes thereunder or shall
pay to Seller at Closing or as soon as such sales tax can be calculated any such
sales tax imposed on Seller thereunder in connection with the transactions
contemplated by this Agreement and the Subsidiary Agreements.
5.17 Guaranties. Buyer shall use its reasonable best efforts to cause
----------
itself or one or more of its subsidiaries to be substituted as of the Closing or
as soon as reasonably practicable thereafter, but in any event not later than as
of that date which is six months after the Closing Date (the "Guarantee Date"),
in all respects for Seller or any affiliate thereof in respect of all
obligations of Seller and any affiliate thereof under each of the guaranties,
letters of credit and letters of comfort obtained by Seller or any of its
affiliates for the benefit of Wesley-Jessen S.p.A. with respect to any
obligation or liability thereof for borrowed money (the "Guaranties"). If Buyer
is unable to effect
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such a substitution with respect to any Guaranty as of the Guarantee Date and
after using its reasonable best efforts to do so, Buyer shall thereafter use its
reasonable best efforts to take all actions and do all things necessary, as soon
as reasonably practicable, to cause Seller or its appropriate affiliates to be
released from or to have the right to terminate, in each case without penalty to
Seller or such affiliates, all Guaranties, including without limitation Buyer
pre-paying or causing the prepayments of the obligations the subject of such
Guaranties. Notwithstanding any provision to the contrary in this Agreement,
Buyer shall indemnify and hold harmless Seller and Schering-Plough and their
affiliates, and the respective directors, shareholders, partners, officers,
employees, agents, consultants, representatives, successors, transferees and
assigns of each of the foregoing, from and against any and all Losses incurred
thereby under the Guaranties.
5.18 Intercompany Accounts. Effective as of the Closing, all intercompany
---------------------
receivables, payables, loans and investments then existing between Seller or any
affiliate thereof, on the one hand, and the Non-U.S. Subsidiaries (other than
Wesley-Jessen (France)), on the other hand, shall be set tled, cancelled,
terminated or otherwise not in effect. Seller shall indemnify and hold harmless
Buyer and its affiliates, and their respective directors, shareholders,
partners, officers, employees, agents, consultants, representatives, successors,
transferees and assigns, from and against any and all Taxes actually incurred or
payable thereby solely as a result of the consummation of any intercompany
transfer in accordance with this Article 5.18.
5.19 Employee Matters. Seller and Buyer hereby agree that, promptly
----------------
following the date hereof, they will engage in good faith discussions with each
other with a view to agreeing on a plan of work force reduction for the Business
and creating a mutually agreeable list of employees employed by the Business to
whom notice of termination shall be given by Seller in accordance with
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the following sentence. Seller agrees to give notice of termination in
compliance with all applicable laws, including without limitation WARN, to the
employees set forth on the list mutually agreed upon by Seller and Buyer
pursuant to the previous sentence as soon as reasonably practicable after
agreement thereon.
ARTICLE 6
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------------------
(a) If this Agreement is terminated pursuant to Article 9 hereof, this
Agreement shall become void and of no further force and effect, except for the
provisions of Articles 3.19, 4.3, 12.2, 14 and 15.6, and neither Buyer nor
Seller (nor their respective affiliates, stockholders, partners, directors,
officers, employees, attorneys in fact or other representatives) shall have any
liability in respect of such termination (except for any liability resulting
from a breach of Articles 3.19, 4.3, 12.2, 14 or 15.6); provided, however, that
if termination is as a result of the failure by the other party hereto to
fulfill any undertaking or commitment provided for herein, only the party duly
terminating this Agreement (and its affiliates, stockholders, partners,
directors, officers, employees, attorneys in fact or other representatives) will
have no such liability. Promptly following termination of this Agreement, each
party shall return to the other all confidential documents and shall not use any
confidential information received from it in connection with the contemplated
transaction.
(b) The representations and warranties made by Seller contained in Article
3 of this Agreement shall survive the Closing and the transactions contemplated
thereby until 5:00 p.m. EST (or DST, as the case may be) on the date which is
nine (9) months after the Closing Date (the "Indemnification Deadline"),
provided that the representations and warranties in Articles 3.8(b), 3.9(a),
3.9(c), 3.19 and 3.23 and in the last sentence of Article 3.24 hereof shall
survive until the
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expiration of the relevant statute of limitations applicable thereto. All
covenants and agreements of Seller contained in this Agreement (which terms do
not include representations and warranties) shall survive the Closing and the
transactions contemplated thereby, except as expressly provided and for the time
periods set forth therein.
(c) The representations and warranties made by Buyer contained in Article
4 of this Agreement shall survive the Closing and the transactions contemplated
thereby until the Indemnification Deadline. All covenants and agreements of
Buyer contained in this Agreement (which terms do not include representations
and warranties) shall survive the Closing and the transactions contemplated
thereby, except as expressly provided and for the time periods set forth
therein.
ARTICLE 7
SELLER'S CONDITIONS OF CLOSING
------------------------------
The obligations of Seller to consummate the transactions contemplated by
this Agreement, unless waived by Seller, are subject to the fulfillment on or
before the Closing of each of the following conditions:
(a) Buyer shall have complied in all material respects with all of
its covenants and agreements contained herein to be performed at or prior to the
Closing, and all of the representations and warranties of Buyer contained in
Article 4 herein shall have been accurate in all material respects when made.
All such representations and warranties of Buyer contained herein shall be
accurate in all material respects at and as of the Closing with the same effect
as though such representations and warranties had been made at and as of the
Closing except for representations and warranties that
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speak as of a specific date or time other than the Closing Date (which need only
be accurate in all material respects as of such date or time);
(b) Seller shall have received a certificate of Buyer dated as of the
Closing Date and in form and substance satisfactory to Seller, signed by an
appropriate officer of Buyer, certifying that the conditions set forth in
paragraph (a) have been fulfilled and including one certified copy of the
resolutions of Buyer's Board of Directors evidencing the authorizations set
forth in Article 4.2 hereof;
(c) Seller shall have received the payment required to be made at the
Closing pursuant to Article 1.4(a);
(d) Seller shall have received such instruments of assignment and
assumption as Seller may reasonably request to evidence Buyer's assumption of
the Liabilities and the contractual obligations comprising part of the Assets;
(e) Buyer shall have executed and delivered to Seller the Transitional
Services Agreement;
(f) No injunction or restraining order or other order shall be in effect
forbidding or enjoining transfer of the Assets;
(g) No statute, rule or regulation shall have been enacted by any U.S.
government or governmental entity or agency making it illegal to transfer the
Assets.
(h) Buyer shall have executed and delivered to Seller a resale certificate
relating to the payment of sales tax under Illinois law and satisfactory for
Seller's purposes thereunder.
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ARTICLE 8
BUYER'S CONDITIONS OF CLOSING
-----------------------------
The obligations of Buyer to consummate the transactions contemplated by
this Agreement, unless waived by Buyer, are subject to the fulfillment on or
before the Closing of each of the following conditions:
(a) Seller shall each have complied in all material respects with all of
its covenants and agreements contained herein to be performed at or prior to the
Closing, and all of Seller's representations and warranties contained in Article
3 shall have been accurate in all material respects when made. All such
representations and warranties of Seller contained herein shall be accurate in
all material respects at and as of the Closing with the same effect as though
such representations and warranties had been made at and as of the Closing
except for representations and warranties that speak as of a specific date or
time other than the Closing Date (which need only be accurate in all material
respects as of such date or time);
(b) Buyer shall have received a certificate of Seller, dated as of the
Closing Date and in form and substance satisfactory to Buyer, signed by an
appropriate officer of Seller, certifying that the conditions set forth in
paragraph (a) have been fulfilled and including one certified copy of the
resolutions of Seller's Board of Directors evidencing the authorizations set
forth in Article 3.2 hereof;
(c) Seller shall have executed and delivered to Buyer the Transitional
Services Agreement;
(d) No injunction or restraining order or other order shall be in effect
forbidding or enjoining transfer of the Assets;
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<PAGE>
(e) No statute, rule or regulation shall have been enacted by any U.S.
government or governmental entity or agency making it illegal to transfer the
Assets;
(f) No material adverse change shall have occurred in the Assets to be
delivered at the Closing, provided that no action taken to comply with Article
5.1(xii), contemplated by Article 5.18 or set forth on Schedule 5.1 hereto shall
------------
constitute a material adverse change for purposes of this clause (f);
(g) Seller shall have satisfied its obligations pursuant to
Article S.4(c);
(h) Seller, where appropriate, shall have delivered or caused to be
delivered to Buyer:
(i) the title deeds to each of the Owned Properties;
(ii) bills of sale, assignments, deeds and other instruments of
conveyance (except that such documents relating to the transfer of any
assets of Non-U.S. Subsidiaries shall be in accordance with the applicable
Subsidiary Agreement and local law); and
(iii) subject to the express terms of this Agreement, such assignments
of trademarks and patents and other intellectual property and such other
assignments as Buyer may reasonably require to vest in Buyer Sellers,
rights, titles, and interests in the Assets and permit Buyer to enter into
and take possession of the Business and such Assets.
(i) Buyer shall have obtained financing proceeds on terms substantially
consistent with the terms contemplated by the Financing Documentation or
otherwise reasonably acceptable to Buyer; provided that this condition shall be
deemed to have been satisfied if Buyer shall not have complied with its covenant
under Article 5.12.
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<PAGE>
ARTICLE 9
TERMINATION
-----------
Anything herein to the contrary notwithstanding, this Agreement, the
Subsidiary Agreements and the agreements ancillary hereto and thereto may be
terminated and the transactions contemplated hereby and thereby abandoned at any
time prior to the Closing:
(a) By mutual consent of Seller and Buyer;
(b) By Seller at any time after June 28, 1995, if any one or more of the
conditions set forth in Article 7 has not been fulfilled or waived as of such
date;
(c) By Seller at any time after June 2, 1995 unless Buyer has delivered
the Financing Documentation to Seller prior to Seller's termination of this
Agreement pursuant to this clause (c); or
(d) By Buyer at any time after June 28, 1995, if any one or more of the
conditions set forth in Article 8 has not been fulfilled or waived as of the
Closing Date.
ARTICLE 10
CLOSING
-------
Except as otherwise specifically provided for in this Agreement, and
provided that all conditions set forth in Articles 7 and 8 shall then be
satisfied or waived, the Closing of the transactions contemplated by this
Agreement shall take place on or before June 28, 1995 and at the office of
Seller, 2000 Galloping Hill Road, Kenilworth, New Jersey 07033. If the Closing
cannot take place on or before such date, then the Closing shall occur on the
second business day following the satisfaction or waiver by the appropriate
party or parties of the conditions set forth in Articles 7 and 8 hereof or at
such other time and place as Buyer and Seller shall mutually agree in writing
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<PAGE>
(the time that the closing hereunder shall take place being referred to herein
as the "Closing" and such dat e being referred to herein as the "Closing Date").
All transactions at the Closing under this Agreement shall be deemed to have
occurred simultaneously. Notwithstanding the foregoing, the Closing of the
transfers of any of the Non-U.S. Subsidiary Shares and the assets of Wesley-
Jessen (France) shall take place at the Closing or, if at that time, the
transfer is still subject to the condition precedent of an authorization,
permit, consent, waiver, order, reissuance or approval of, or filing with, any
Non-U.S. public body or authority or any third party to any written contract,
agreement, arrangement, commitment or personal property lease listed or
described on Part I of Schedule 3.15, then the Closing of such affected Non-U.S.
-------------
Subsidiary Shares or assets of Wesley-Jessen (France), shall take place as soon
as practically possible on or after the Closing and for purposes of this
Agreement those transactions shall also be deemed to have occurred
simultaneously with the Closing and the Closing Date. At the Closing, Buyer and
Seller shall deliver, or cause to be delivered, such certificates, receipts or
other documents or instruments as are specifically provided for in this
Agreement. Risk in and title to the Assets shall pass to Buyer at Closing.
ARTICLE 11
UNAUTHORIZED TRADE
------------------
11.1 Restrictions Against Unauthorized Trade. For a period of three (3)
---------------------------------------
years from and after the Closing, Seller and its affiliates shall not, directly
or indirectly, engage anywhere in the world in the design, manufacture, sale,
supply, trade, distribution or marketing of contact lenses and any products
similar to those listed on Part II of Schedule 1.2(a)(ix), provided that this
-------------------
restriction shall not prevent Seller from acquiring, being acquired by or
otherwise combining with any corporation, joint venture, partnership or other
entity engaged in any of the foregoing actions so long
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as such actions relating to contact lenses do not account for a majority of such
corporation's, joint ventures, partnership's or entity's annual revenues or a
majority of the book value of its assets (and do not account for $30 million or
more of such corporation's, joint ventures, partnership's or entity's annual
revenues or book value of its assets in the case of an acquisition thereof by
Seller), provided further that this restriction shall not prevent Seller from
acquiring any corporation, joint venture, partnership or other entity engaged in
any of the foregoing actions, regardless of the limitations set forth in the
preceding proviso, so long as Seller shall use its reasonable best efforts to
cause such corporation, joint venture, partnership or entity to divest that
portion of its business engaged in such actions on commercially reasonable terms
as soon as practicable after and within a year following such acquisition. The
provisions of this Article 11.1 also shall not apply to the Excluded Assets and
the Excluded Liabilities or to the matters set forth in Article 11.2.
11.2 Use of Names, Intellectual Property, etc. From and after the Closing
-----------------------------------------
Seller will not use any of the rights to names, trademarks, service marks, trade
names, copyrights, trade secrets or patents or any other intellectual property
which are part of the Assets to be transferred to Buyer pursuant to this
Agreement or any other agreement contemplated hereby except to the extent that
an independent third party could use the same without prior license from Buyer
or any of its affiliates or use any which are confusingly similar to the
foregoing. Immediately following the Closing, Seller shall cause Wesley-Jessen
to take such action and to make such filings as necessary to change its name so
as not to include any name that is part of the Assets.
ARTICLE 12
PUBLICITY; CONFIDENTIALITY
--------------------------
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<PAGE>
12.1 Publicity. Seller and Buyer agree that no publicity, release or
---------
announcement concerning the execution of this Agreement, any of the provisions
of this Agreement, the Subsidiary Agreements or the transactions contemplated
hereby or thereby shall be issued without the advance approval of the form and
content of same by Seller and Buyer; provided, however, that such consent shall
not be unreasonably withheld and that no such consent shall be required when
such disclosure is required by applicable law as determined in good faith by the
disclosing party's counsel.
12.2 Confidentiality. Whether or not the transactions contemplated hereby
---------------
are consummated, each of Buyer and Seller, for a period of five years following
the Closing Date agree (and agree to use all reasonable efforts to cause their
respective affiliates) to refrain from using in any manner and to keep
confidential in the same manner as it protects the confidentiality of similar
information and data of its own, any and all confidential information and
confidential data concerning the business and affairs of the other party hereto
or its affiliates which it has received as a result of this Agreement or any
investigation made in connection herewith, except to the extent that such party
can demonstrate that the information and/or data (i) is generally available to
companies that engage in businesses similar to the Business through no act or
failure to act of the disclosing party, (ii) was already known to it on a non-
confidential basis on the date of receipt or (iii) is subsequently disclosed to
it on a nonconfidential basis by a third party which, to the disclosing party's
best knowledge, does not have a confidential relationship with said other party
with respect to such information. Notwithstanding the foregoing, Buyer and
Seller (and their respective affiliates) shall be free to disclose any such
confidential information or data to the extent and only to the extent (x)
required by applicable law, (y) required by a government in a duly authorized
investigation or (z) during the course of or in connection with any litigation,
arbitration or other proceeding or other
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<PAGE>
legally required filing (including with respect to taxes or regulatory
compliance). Prior to any disclosure by either Buyer or Seller pursuant to the
preceding sentence, such party shall be required to give reasonable prior notice
to the other party of such intended disclosure and, if requested by the other
party in a reasonably sufficient time to take action, to use its best reasonable
efforts to obtain a protective order or similar protection for the other party.
ARTICLE 13
NOTICES
-------
(a) Any notices or communications permitted or required hereunder shall be
deemed sufficiently given if hand delivered or sent (i) postage prepaid by
registered or certified mail, return receipt requested or (ii) by Federal
Express or another recognized overnight courier service (fee prepaid), or (iii)
by facsimile transmission, to the respective parties as set forth below, or to
such other address as a party may notify the other of in writing:
if to Seller, to:
Schering Corporation
2000 Galloping Hill Road
Kenilworth, New Jersey 07033
Attention: President
Telecopy Number: (908) 298-5379
copy to:
Schering-Plough Corporation
One Giralda Farms
Madison, New Jersey 07940
Attention: General Counsel
Telecopy Number: (201) 822-1960
if to Buyer, to:
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<PAGE>
WJ Acquisition Corp.
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02166
Attention: President
Telecopy Number: (617) 572-3274
copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Karl E. Lutz, P.C.
Jeffrey C. Hammes
(b) A notice or communication permitted or required hereunder shall be
deemed to have been served either (i) if hand delivered, at the time of
delivery, (ii) if sent by post as aforesaid, on the date of receipt, as
evidenced by proper postal documentation, (iii) if by Federal Express or other
recognized overnight courier service, on the business day after the date the
notice was properly delivered to such courier, or (iv) if via facsimile
transmission, at the time of receipt, with oral or written confirmation of
receipt duly noted.
ARTICLE 14
EXPENSES OF THE PARTIES
-----------------------
Regardless of whether or not the transactions contemplated hereby are
consummated, each of Buyer and Seller (and their respective affiliates) shall
pay their own expenses (including, without limitation, the fees, disbursements
and expenses of their attorneys, accountants and investment advisors) in
connection with the negotiation, preparation and execution of this Agreement and
the Subsidiary Agreements. All expenses incurred in connection with the transfer
of Assets and the con summation of the transactions contemplated hereby
(including without limitation patent, trademark,
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<PAGE>
registered copyright and FDA and foreign transfer or filing fees, value added
tax, stamp duties and sales, use and other similar transfer taxes and costs
("Transfer Taxes")) shall be borne by the Buyer other than Transfer Taxes
incurred as a result of and solely attributable to the transfer of the assets of
Wesley-Jessen (France) pursuant hereto and pursuant to the respective Subsidiary
Agreement which would not otherwise have been incurred had the capital stock of
Wesley-Jessen (France) been transferred to Buyer or an affiliate thereof in the
alternative. For the transfer of regulatory approvals, patents, trademarks,
registered copyrights and applications therefor in accordance with this
agreement, Seller agrees to prepare, execute and notarize a global assignment of
all such regulatory approvals, patent, registered copyrights and trademark
rights to Buyer. Any additional documents necessary to transfer or record
transfer of these rights will be prepared by Buyer. Seller agrees to execute
and, if necessary, notarize such additional documents. Seller shall reasonably
cooperate with Buyer, at Buyer's cost and expense, to effect any further
legalization of the global assignment or additional documents, which further
legalization shall be the responsibility of Buyer. Buyer shall otherwise be
responsible for preparing all assignment documents for recording transfers of
any Intellectual Property that is an Asset to Buyer.
ARTICLE 15
MISCELLANEOUS
-------------
15.1 Binding Effect; Assignment. This Agreement shall be binding upon, and
--------------------------
inure to the benefit of, Buyer and Seller and their respective successors, legal
representatives and assigns as permitted in accordance with this Article 15.1.
Except as expressly provided with respect to rights of indemnification under
Article 2 and with respect to the rights of Employees under Article 5.4, nothing
herein shall create or be deemed to create any third party beneficiary rights in
any person
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<PAGE>
or entity not a party to this Agreement. Prior to the Closing hereunder, no
assignment of this Agreement or of any rights or obligations hereunder may be
made by Seller (by operation of law or otherwise), other than to a wholly-owned
subsidiary of Seller, without the prior written consent of Buyer, provided that
no such assignment shall relieve Seller of its obligations hereunder. Prior to
the Closing hereunder, Buyer may not assign this Agreement or any rights or
obligations hereunder (by operation of law or otherwise), other than to a
wholly-owned subsidiary of Buyer and other than an assignment of Buyer's rights
hereunder as collateral to secure the Financing, without the written consent of
Seller, provided that any such assignment by Buyer will not relieve Buyer of its
obligations hereunder. Following the Closing, each party hereto may assign its
rights hereunder without the consent of the other party hereto, except that in
no event may Seller or Buyer assign any of its rights or obligations under any
of Article 2, Article 5.4, Article 5.5 or Article 12 to any party (other than to
a purchaser of all or substantially all of the assets of the assigning party or
to an affiliate of the assigning party which is controlled by such party, which
assignment shall remain effective only for so long as the assigning party
retains such control) without the prior written consent of Seller or Buyer, as
the case may be, which consent shall not be unreasonably withheld. Any attempted
assignment without the required consent shall be void.
15.2 Exhibits and Schedules.
----------------------
(a) All Exhibits and Schedules attached hereto and the documents and
agreements referred to herein to be delivered and the acts to be performed at or
subsequent to the Closing ("Items") are incorporated herein and expressly made a
part of this Agreement as fully as though completely set forth herein, and all
references to this Agreement herein or in any such Items shall be deemed to
refer to and include all of said Items.
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<PAGE>
(b) Disclosure of any fact or item in any Schedule attached hereto
referenced by a particular Article hereof, shall, should the existence of the
fact or item or its contents be relevant to any other Schedule attached hereto
or any other Article hereof, be deemed to be disclosed with respect to that
other Schedule or Article whether or not an explicit cross-reference appears.
15.3 Counterparts. This Agreement and any amendments hereto may be
------------
executed in any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. In pleading or proving any provision of this Agreement it shall not
be necessary to produce more than one counterpart.
15.4 Article Headings; Monetary Thresholds. The Article headings contained
-------------------------------------
in this Agreement are inserted for convenience of reference only and shall not
otherwise affect the meaning or interpretation or be deemed a substantive part
of this Agreement. Except as it specifically relates to the implementation of
the specified thresholds for the purposes set forth in Article 2, no references
to monetary amounts set forth in this Agreement shall be deemed to represent
agreement of the parties as to any standard or definition of materiality.
15.5 Waiver. The failure of any party at any time or times to enforce or
------
require performance of any provision hereof shall in no way operate as a waiver
or affect the right of such party at a later time to enforce the same. No waiver
by any party of any condition or the breach of any term, covenant,
representation or warranty contained in this Agreement, whether by conduct or
otherwise, in any one or more instances, shall be deemed to be or construed as a
further or continuing waiver of any such condition or breach, or a waiver of any
other condition or of any breach of any other term, covenant, representation or
warranty contained in this Agreement.
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<PAGE>
15.6 Governing Law and Forum. This Agreement, all Items and any agreements
-----------------------
contemplated hereby and thereby (unless otherwise expressly provided herein or
therein) shall be governed by and construed in all respects under the laws of
the State of New Jersey, without reference to its conflict of laws rules or
principles. Any action to enforce, which arises out of or in any way relates to,
any of the provisions of this Agreement, all Items and any agreements
contemplated hereby or thereby (unless expressly provided herein or therein)
shall be brought and prosecuted in a federal district court or state court
located in the United States of America which has jurisdiction over the subject
matter of the action; provided, however, that any action (i) which relates
solely to a claim regarding title or any Lien or (ii) is to enforce or arises
out of Article 11 hereof may be brought in the appropriate court of local
jurisdiction. In addition, an action may also be brought in the appropriate
court of local jurisdiction if the federal district courts or state courts
sitting in the United States of America do not accept jurisdiction upon first
application. In any action relating to this Agreement, all Items and any
agreements contemplated hereby and thereby, the parties consent to (i) the
service of process by registered mail, return receipt requested, or by any other
manner provided by New Jersey or federal law and (ii) the personal jurisdiction
of, and venue in, the federal district courts and state courts sitting in the
State of New Jersey and the Federal District encompassing Newark, New Jersey,
and waive any objection to personal jurisdiction or venue in the State of New
Jersey or the Federal District encompassing Newark, New Jersey. The parties
hereto agree that they have had substantial contacts with the State of New
Jersey and the Federal District encompassing Newark, New Jersey in connection
with the negotiation and execution of this Agreement.
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<PAGE>
15.7 Amendment and Modification. No amendment or modification of this
--------------------------
Agreement will be binding upon a party unless signed in writing by an authorized
representative of such party.
15.8 Entire Agreement. This Agreement, the Subsidiary Agreements, all
----------------
Items and all other agreements, documents and certificates referred to herein or
therein and delivered hereunder or thereunder, constitute the entire
understanding of the parties hereto concerning the sale and purchase of the
Business and the Assets and the assumption of the Liabilities and cancel and
supersede all previous agreements and understandings, oral or written, between
the parties with respect to the subject matter hereof. Any reference in any
Subsidiary Agreement to the mutual agreement of the parties shall be determined
expressly in accordance with the principles, agreements, conditions and other
terms of this Agreement. To the extent of any inconsistency between the
provisions of this Agreement and those of the individual Subsidiary Agreements,
the provisions of this Agreement shall control. It is understood that the
Purchase Price herein is inclusive of the purchase prices under the Subsidiary
Agreements, and due credit under such Subsidiary Agreements shall be given
therefor.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives as of the day and year above written.
SCHERING CORPORATION
By: Hugh A. D'Andrade
-----------------------------------
Title: Exective Vice President
--------------------------------
WJ ACQUISITION CORP.
By: Adam Kirsch
-----------------------------------
Name: Adam Kirsch
---------------------------------
Title: President
--------------------------------
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<PAGE>
EXHIBIT 2.2
AGREEMENT FOR PURCHASE AND SALE
This Agreement for Purchase and Sale (the "Agreement") is made as of the
5th day of July, 1996, by and between Wesley-Jessen Corporation, a Delaware
corporation ("Purchaser" or "WJ"), with principal executive offices at 333 East
Howard Avenue, Des Plaines, Illinois 60018; and Pilkington plc, a company
registered under the laws of England and Wales ("Seller" or "Pilkington"), with
principal executive offices at Prescot Road, St. Helens, Merseyside, England
WA10 3TT.
WITNESSETH:
WHEREAS, Seller desires to sell, or cause to be sold, to Purchaser and
certain of its affiliates, which affiliates are identified as follows and are
referred to herein individually as a "Purchaser Affiliate" and collectively as
the "Purchaser Affiliates":
Wesley-Jessen Limited, a company registered under the laws of England,
whose address is 127 High Street, Rickmansworth, Herts, England WD3 1AM;
Wesley-Jessen S.A.R.L., a company registered under the laws of France,
whose address is 6, rue Sadi Carnot, 93170 Bagnolet, France;
Wesley-Jessen S.p.A., a company registered under the laws of Italy, whose
address is Via Odone, 11, Rome, Italy; and
Wesley-Jessen GmbH, a company registered under the laws of Germany ("WJ
GmbH"), whose address is c/o Oppenhoff & Radler, Hohenstaufenring 62, 50674
Cologne, Germany;
and Purchaser desires to purchase or cause to be purchased, from Seller and
certain of its affiliates, which affiliates are identified as follows and are
referred to herein individually as a "Seller Affiliate" and collectively as the
"Seller Affiliates":
Pilkington Brothers Limited, a company registered under the laws of England
and Wales, whose address is Prescot Road, St. Helens, Merseyside, England
WA10 3TT;
Pilkington Barnes-Hind Holdings Limited, a company registered under the
laws of England and Wales, whose address is Prescot Road, St. Helens,
Merseyside, England WA10 3TT;
Pilkington Holdings, Inc., a company registered under the laws of the State
of Delaware, whose address is 811 Madison Avenue, Toledo, Ohio 43697;
Pilkington International Holdings B.V., a company registers under the laws
of the Netherlands, whose address is Burgemeester Haspelslaan 35, 1181 NB
Amstelveen, Netherlands;
<PAGE>
Pilkington Barnes-Hind Optics Limited, a company registered under the laws
of England and Wales, whose address is Permalens House, 1 Botley Road,
Hedge End, Southampton S03 3HB, England;
Pilkington Brothers (South Wales) Limited, a company registered under the
laws of England and Wales, whose address is Prescot Road, St. Helens,
Merseyside, England WA10 3TT;
Pilkington Nederland (No. 1) B.V., a company registered under the laws of
The Netherlands, whose address is Burgemeester Haspelslaan 35, 1181 NB
Amstelveen, Netherlands; and
Pilkington Nederland (No. 2) B.V., a company registered under the laws of
The Netherlands, whose address is Burgemeester Haspelslaan 35, 1181 NB
Amstelveen, Netherlands;
(i) all of the issued and outstanding shares of capital stock of the following
entities (the "Acquired Stock"):
Pilkington Barnes Hind International, Inc. a company registered under the
laws of the State of Delaware ("PBH International"), whose address is 811
Madison Avenue, Toledo, Ohio 43697;
Barnes-Hind International Inc., a company registered under the laws of
Delaware ("Barnes-Hind International"), whose address is 811 Madison
Avenue, Toledo, Ohio 43697;
Pilkington Barnes Hind (Services) Limited, a company registered under the
laws of England and Wales ("PBH Services"), whose address is Permalens
House, 1 Botley Road, Hedge End, Southampton S03 3HB, England;
Pilkington Barnes Hind N.V., a company registered under the laws of Belgium
("PBH NV"), whose address is Kennedypark 19, 8500 Kortrijk, Belgium;
Pilkington Barnes Hind SA, a company registered under the laws of France
("PBH France"), whose address is 5 rue Paul Bert, 93581 Saint-Ouen Cedex,
France;
Pilkington Barnes Hind S.A., a company registered under the laws of Spain
("PBH Spain"), whose address is Paseo de la Habana, 145, 28036 Madrid,
Spain;
Pilkington Barnes-Hind Pty Ltd., a company registered under the laws of
Australia ("PBH Australia"), whose registered office is 9 Powells Road,
Unit #1, Brook-Vale, New South Wales 2010, Australia;
Pilkington Barnes Hind Japan KK, a company registered under the laws of
Japan ("PBH Japan"), whose registered office is Kashikichi Ningyo-cho
Bldg., 3rd Floor, 3-10-1 Nihonbashi Ningyo-cho, Chuo-Ku, Tokyo 103, Japan;
-2-
<PAGE>
Pilkington Barnes Hind Nederland B.V., a company registered under the laws
of the Netherlands ("PBH BV"), whose address is Einsteinstraat 6A, 2811 EP
Reejwijk, Netherlands;
Pilkington Barnes Hind SpA, a company registered under the laws of Italy
("PBH SpA"), whose address is Via E. Fermi (ang. Via G. Carducci), 21042
Caronno Perusella (VA), Italy;
Pilkington Barnes-Hind Limited, a company registered under the laws of
England and Wales ("PBH Ltd."), whose registered office is Permalens House,
1 Botley Road, Hedge End, Southampton S03 3HB, England;
Pilkington Diffractive Lenses Limited, a company registered under the laws
of England and Wales ("Diffractive"), whose registered office is Permalens
House, Botley Road, Hedge End, Southampton S03 3HB, England; and
Pilkington Barnes Hind, Inc., a Delaware corporation ("PBH"), whose address
is 810 Kifer Road, Sunnyvale, California 94086;
(referred to herein collectively as the "Acquired Subsidiaries" and each
individually as an "Acquired Subsidiary") all on the terms and subject to the
conditions set forth herein, and (ii) the assets of Pilkington Deutschland GmbH,
a company registered under the laws of Germany ("PD"), whose address is 4650
Gelsenkirchen, Germany, exclusively relating to the research, development,
manufacture, distribution, and sale of contact lenses (the worldwide business
conducted by the Acquired Subsidiaries referred to in (i) and the worldwide
business conducted by PD referred to in (ii) are collectively referred to herein
as the "Contact Lens Products Business").
NOW, THEREFORE, in consideration of the covenants and mutual agreements set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in reliance upon the
representations and warranties contained herein, the parties do hereby agree as
follows:
ARTICLE 1
PURCHASE AND SALE OF STOCK AND ASSETS
1.1 Purchase and Sale of Acquired Stock. Upon the terms and subject to the
-----------------------------------
conditions set forth herein, Seller agrees to sell, transfer, assign, and
deliver or cause to be sold, transferred, assigned, and delivered to
Purchaser or the Purchaser Affiliates, at the Closing (as hereinafter
defined in Section 9.1 hereof) and Purchaser agrees to purchase, or cause
-----------
to be purchased, all of Seller's and its affiliates' right, title, and
interest in and to the Acquired Stock, free and clear of any liens, claims,
options, charges, encumbrances or rights of any nature, as follows:
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<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Class of Number
Name of Acquired Subsidiary Stock of Shares
- ------------------------------------------------------------------
<S> <C> <C>
Pilkington Barnes-Hind International, Inc. Common 1
- ------------------------------------------------------------------
Barnes-Hind International Inc. Common 1,000
- ------------------------------------------------------------------
Pilkington Barnes Hind (Services) Limited Ordinary 2
- ------------------------------------------------------------------
Pilkington Barnes Hind N.V. Ordinary 6,777
- ------------------------------------------------------------------
Pilkington Barnes Hind SA Ordinary 45,004
- ------------------------------------------------------------------
Pilkington Barnes Hind S.A. Ordinary 555
- ------------------------------------------------------------------
Pilkington Barnes-Hind Pty Ltd. Ordinary 1,340,000
- ------------------------------------------------------------------
Pilkington Barnes Hind Japan KK Common 400
- ------------------------------------------------------------------
Pilkington Barnes Hind Nederland B.V. Ordinary 71
- ------------------------------------------------------------------
Pilkington Barnes Hind SpA Ordinary 80,000
- ------------------------------------------------------------------
Pilkington Barnes-Hind Limited Ordinary 850,000
- ------------------------------------------------------------------
Pilkington Diffractive Lenses Limited Ordinary 1,000,000
- ------------------------------------------------------------------
Pilkington Barnes Hind, Inc. Common 1
- ------------------------------------------------------------------
</TABLE>
1.2 Purchase and Sale of the Assets. Subject to the terms and conditions
-------------------------------
of this Agreement, excluding only the Excluded Assets (as defined in
Section 1.3 below), Seller agrees to cause PD to sell, transfer,
-----------
assign, and deliver to Purchaser or the Purchaser Affiliates, and
Purchaser agrees to purchase, or cause to be purchased, from PD, all
of PD's right, title, and interest in and to those assets, rights, and
properties of PD of every kind, character, and description, whether
tangible, intangible, real, personal, or mixed, and wherever located,
relating exclusively to or used directly and exclusively in the
Contact Lens Products Business as conducted by PD, as specified below,
if any (the "Acquired Assets"):
(a) The furniture, machinery, equipment, supplies, tools for
maintenance and repair or otherwise, office equipment, other goods and all
other tangible personal property located in Germany or otherwise relating
exclusively to or used directly and exclusively in the operation of the
Contact Lens Products Business as conducted by PD,
(b) The inventory, including but not limited to, finished products,
work in process, inventory in transit to PD, raw materials, spare parts,
packing materials, shipping
-4-
<PAGE>
containers, and all other office and maintenance supplies and other similar
items or materials relating exclusively to or used directly and exclusively in
the operation of the Contact Lens Products Business as conducted by PD;
(c) The motor vehicles, including automobiles, trucks and other
rolling stock, used directly and exclusively in the operation of the Contact
Lens Products Business as conducted by PD;
(d) All of PD's title, claims, and rights under all contracts,
agreements, and purchase and sale orders relating exclusively to the Contact
Lens Products Business as conducted by PD;
(e) All existing correspondence, files, invoices, customer lists and
information, supplier lists and information, employee files (except for those
employees who do not become employees of WJ or the Purchaser Affiliates),
operating manuals, catalogs, technical, accounting, manufacturing, and
procedural manuals or information sheets, pricing sheets, advertising and
display materials, and brochures, and any confidential information and any other
materials and data associated exclusively with or used or employed by PD
directly and exclusively in the operation of the Contact Lens Products Business
as conducted by PD;
(f) All Intellectual Property (as defined in Section 2.16 hereof) and
------------
government approvals and permits issued to, or owned or used by, PD, and any
other rights to use such assets relating exclusively to or used directly and
exclusively in the operation of the Contact Lens Products Business as conducted
by PD including the right to sue for past infringement;
(g) Except as provided in Section 6.9 hereof, all royalty rights,
-----------
security deposits, and rights and claims to refunds and adjustments of any kind
relating exclusively to or arising exclusively out of the operation by PD of the
Contact Lens Products Business, other than any thereof included in the Excluded
Assets;
(h) All government licenses, franchises, certificates, orders,
approvals, registrations, and permits used exclusively in the operation of the
Contact Lens Products Business as conducted by PD to the extent transfer is
permitted by applicable law;
(i) All rights of PD under express or implied warranties relating
exclusively to the Contact Lens Products Business as conducted by PD;
(j) All accounts and notes receivable that relate exclusively or
directly to the Contact Lens Products Business as conducted by PD;
(k) All prepayments and prepaid expenses to the extent WJ or the
Purchaser Affiliates receive a benefit after Closing; and
-5-
<PAGE>
(l) Any additional items of tangible or intangible property used or
owned by PD which are not included above and which relate exclusively to or
are used directly and exclusively in the operation of the Contact Lens
Products Business as conducted by PD.
1.3 Assets Not Being Transferred. Anything contained in Section 1.2 or
---------------------------- -----------
elsewhere herein to the contrary notwithstanding, there are expressly
excluded from the assets, properties, interests in properties and
rights to be sold, transferred, assigned, and delivered to Purchaser
or the Purchaser Affiliates at the Closing the following:
(a) All of the Seller's, Seller Affiliates' and PD's right, title, and
interest under or related to this Agreement, including, without limitation,
the consideration delivered to the Seller, Seller Affiliates and PD
pursuant to this Agreement;
(b) The capital stock of PD;
(c) All cash and bank accounts of PD;
(d) Except as provided in Section 5.2 hereof, any rights to the name
"Pilkington," or any other name using the word "Pilkington," or the
Pilkington logo; and
(e) All of PD's right, title, and interest relating to any assets,
rights, and properties of PD, wherever located, whether tangible or
intangible, not exclusively or directly related to the Contact Lens
Products Business as conducted by PD.
For convenience of reference, the assets, properties, interests in properties
and rights of PD described in this Section 1.3 which are not to be sold,
-----------
transferred, conveyed, and assigned to the Purchaser or the Purchaser Affiliates
at the Closing are collectively referred to herein as the "Excluded Assets."
1.4 Assumed Liabilities. Neither Purchaser nor the Purchaser Affiliates
-------------------
shall assume any liabilities or obligations of PD to the extent that
they arise out of or relate to the ownership, use or operation of the
Acquired Assets on or prior to the Closing Date, whether fixed or
contingent, known or unknown, matured or unmatured, executory or non-
executory except for (a) accounts payable and accrued expenses to the
extent set forth on the statement of Closing Net Current Assets (as
hereinafter defined) provided in accordance with Section 1.7(f) below,
--------------
and (b) the PD Foreign Employee (as hereinafter defined) liability to
the extent provided in Section 6.12 hereof. For convenience of
------------
references the foregoing liabilities and obligations of PD being
assumed by the Purchaser and the Purchaser Affiliates are collectively
referred to herein as the "Assumed Liabilities." The Purchaser and the
Purchaser Affiliates shall assume and discharge all (i) Assumed
Liabilities and (ii) liabilities or obligations of the Acquired
Subsidiaries to the extent that they arise out of or relate to the
ownership, use, or operation of the Acquired Assets after the Closing
Date.
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<PAGE>
1.5 Liabilities Not Being Assumed. Except as expressly set forth in
-----------------------------
Section 1.4, neither the Purchaser, the Purchaser Affiliates, nor the
-----------
Acquired Subsidiaries are assuming any liabilities or obligations,
whether fixed or contingent, known or unknown, matured or unmatured,
executory or non-executory, of Seller, the Seller Affiliates, or PD to
the extent they arise out of or relate to ownership, use or operation
of the Acquired Assets on or prior to the Closing Date, including but
not limited to:
(a) all short-term and long-term indebtedness for borrowed money and
all long-term liabilities, each as determined in accordance with U.K. GAAP
(as hereinafter defined), of PD incurred or arising on or prior to the
Closing Date;
(b) all liabilities and obligations of Seller, the Seller Affiliates,
or PD under this Agreement or with respect to or arising out of the
consummation of the transactions contemplated by this Agreement; and
(c) all liabilities and obligations of Seller, the Seller Affiliates,
or PD for fees and expenses and taxes incurred in connection with, relating
to, or arising out of the consummation of the transactions contemplated by
this Agreement.
For convenience of reference, the foregoing liabilities and obligations of the
Seller, the Seller Affiliates, and PD not being assumed by the Purchaser or the
Purchaser Affiliates are collectively referred to herein as the "Excluded
Liabilities." The Seller, the Seller Affiliates, and PD shall retain and
discharge all Excluded Liabilities.
1.6 Purchase Price. The aggregate purchase price to be paid by Purchaser
--------------
to Seller for the Acquired Stock and the Acquired Assets (the
"Purchase Price") is (i) Seventy-Eight Million Eight Hundred
Seventy-Five Thousand and No/ 100 Dollars ($78,875,000), to be
adjusted in accordance with Sections 1.7 and 1.8 hereof, and (ii) the
------------ ---
Assumed Liabilities, and will be paid as provided below:
(a) At the Closing, Purchaser shall pay the amount of Seventy-Three
Million Eight Hundred Seventy-Five Thousand and No/100 Dollars
($73,875,000), to be adjusted in accordance with Sections 1.7 and 1.8
------------ ---
hereof, by wire transfer in immediately available funds to one or more bank
account(s) designated by Seller; and
(b) At the Closing, Purchaser shall deliver the executed promissory
note of Wesley-Jessen Holding, Inc., a Delaware corporation ("WJ Holding")
in the form of Exhibit A hereto (the "Note"), in favor of Pilkington
Holdings, Inc. in the amount of Five Million and No/100 Dollars
($5,000,000).
-7-
<PAGE>
1.7 Purchase Price Adjustment.
-------------------------
(a) For purposes of this Agreement, "Net Current Assets" means the
excess of the consolidated current assets (excluding cash that Purchaser has not
requested Seller in writing to leave in the Acquired Subsidiaries and inventory)
of the Acquired Subsidiaries and, with respect to PD, the consolidated current
assets (excluding cash and inventory) to be transferred pursuant to this
Agreement over the consolidated current liabilities of the Acquired Subsidiaries
----
which are not required to be paid by Seller or the Seller Affiliates pursuant to
this Agreement, and, with respect to PD, the consolidated current liabilities
which are not required to be paid by Seller or the Seller Affiliates pursuant to
this Agreement (excluding, for the purposes of each of the foregoing
calculations, any liabilities, costs or obligations relating to the Contact Lens
Products Business' restructuring activities in Europe as described on Schedule
--------
1.7(a) hereto) (which schedule shall be updated by Seller as soon as practicable
- ------
after the date hereof with Seller's list, with estimated redundancy costs
totaling not less than $3.2 million, of all employees which have been or are to
be made redundant as a result of such restructuring activities (the "European
Redundant Employees")) ("European Restructuring Activities"), up to but not
exceeding $7,319,000 less any amounts expended on such restructuring activities
on or prior to the Closing Date, short-term indebtedness for borrowed money and
any accrued interest related thereto and, without duplication, any liabilities
which are required to be paid by Seller or the Seller Affiliates pursuant to
this Agreement), each as determined in accordance with U.K. Generally Accepted
Accounting Principles ("U.K. GAAP") (subject to the absence of footnotes),
applied in a manner consistent with the accounting policies and procedures
attached as Schedule 1.7(b) hereto, to the extent in accordance with U.K. GAAP.
---------------
(b) For purposes of this Agreement, "Capital Expenditures" means all
capital expenditures incurred solely in respect of the Contact Lens Products
Business (net of the proceeds related to the disposal or other sale of fixed
assets), all as determined in accordance with U.K. GAAP,
(c) At least ten (10) business days prior to the Closing, Pilkington
shall prepare and deliver to WJ (i) an unaudited estimated consolidated balance
sheet of the Contact Lens Products Business as of the Closing Date (the
"Estimated Closing Balance Sheet") prepared in accordance with U.K. GAAP
(subject to the absence of footnotes), applied in a manner consistent with the
accounting policies and procedures set forth on Schedule 1.7(b) attached hereto,
---------------
to the extent in accordance with U.K. GAAP, which Estimated Closing Balance
Sheet shall reflect the estimated consolidated Net Current Assets of the Contact
Lens Products Business as of the close of business on the Closing Date (the
"Estimated Closing Net Current Assets") and the items reflected in Section 1.8,
-----------
and (ii) an estimate of the Capital Expenditures of the Contact Lens Products
Business for the period commencing April 1, 1996 through and including the
Closing Date (the "Estimated CAPEX"); provided that if Pilkington and WJ cannot
agree upon the amounts to be included in the Estimated Closing Balance Sheet,
the Estimated Closing Net Current Assets, or Estimated CAPEX, such
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<PAGE>
amounts shall be based upon the balances as of March 31, 1996 for Net Current
Assets or Target CAPEX, as defined in subsection (e) below.
(d) If Estimated Closing Net Current Assets are less than $15.1
million (the "Peg Number"), the cash portion of Lie Purchase Price shall be
decreased by the amount of such shortfall. If Estimated Closing Net Current
Assets are greater than the Peg Number, the cash portion of the Purchase Price
shall be increased by the amount of such excess. To the extent that the Peg
Number includes any amounts (i) for Taxes measured by or imposed on income, (ii)
which are required to be paid by Seller or its affiliates pursuant to this
Agreement, (iii) for management bonuses in excess of $1.0 million, or (iv) for
Japanese retirement allowances in excess of the calculation thereof on voluntary
basis, then the Peg Number will be increased dollar for dollar by such amounts.
(e) If Estimated CAPEX (determined on a daily basis) is less than (i)
$35,069 per day for the period from April 1, 1996 through and including any
Closing Date which occurs on or prior to June 30, 1996 and (ii) $17,534 per day
for the period from July 1, 1996 through and including any Closing Date which
occurs after June 30, 1996 (the amount derived from calculating (i) and (ii)
above for the period from April 1, 1996 through and including any Closing Date
shall be collectively referred to as the "Target CAPEX"), the cash portion of
the Purchase Price shall be decreased by the cumulative amount of such
shortfall.
For example, assume that Estimated CAPEX was comprised of $1 million spent
during each of April, May and June of 1996 and $100,000 spent through and
including an assumed closing date of July 15, 1996. In that case, Estimated
CAPEX would total $3.1 million. The required daily rates of $35,069 and
$17,534, respectively, would imply a Capital Expenditures requirement in that
period of $3,454,289, or $354,289 greater than Estimated CAPEX. Accordingly,
the cash portion of the Purchase Price would be reduced by $354,289.
(f) As promptly as practicable, but in no event later than one hundred
twenty (120) days after the Closing, WJ will deliver to Pilkington (i) an
audited consolidated balance sheet of the Contact Lens Products Business as of
the close of business on the Closing Date (the "Closing Balance Sheet") prepared
by a "Big Six" public accounting firm in accordance with U.K. GAAP, which shall
reflect the Net Current Assets of the Contact Lens Products Business as of the
close of business on the Closing Date (the "Closing Net Current Assets"), and
(ii) a statement of the Capital Expenditures of the Contact Lens Products
Business for the period commencing April 1, 1996 through and including the
Closing Date ("Actual CAPEX").
(g) If Pilkington disagrees with WJ's determination of Closing Net
Current Assets and/or Actual CAPEX, Pilkington shall notify WJ in writing of
such disagreement (such notice setting forth the basis for such disagreement in
reasonable detail) and WJ and Pilkington thereafter shall negotiate in good
faith to resolve any such disagreements. If WJ
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<PAGE>
and Pilkington are unable to resolve any such disagreements within thirty (30)
days after WJ delivers the Closing Balance Sheet to Pilkington, WJ and
Pilkington shall submit the dispute to a "Big Six" public accounting firm
jointly selected by WJ and Pilkington for resolution. If WJ and Pilkington are
unable to agree upon a "Big Six" public accounting firm, an accounting firm
shall be selected by lot from a list of up to four "Big Six" accounting firms
(excluding Price Waterhouse, Coopers & Lybrand, or any other "Big Six" public
accounting firms retained pursuant to Section 1.7(c) or (f) above). The
-------------- ---
accounting firm ultimately selected pursuant to this paragraph is hereinafter
referred to as the "Independent Auditor."
(h) WJ and Pilkington shall use their reasonable best efforts to cause
the Independent Auditor to resolve all disagreements over the Closing Net
Current Assets and/or Actual CAPEX as soon as practicable, but in any event
within 60 days after submission of the disputes to the Independent Auditor. The
resolution of such disagreements and the determination of Closing Net Current
Asset and/or Actual CAPEX by the Independent Auditor shall be final and binding
on WJ and Pilkington and their respective affiliates. The costs and expenses of
the Independent Auditor shall be paid equally by WJ and Pilkington.
(i) If Closing Net Current Assets (as finally determined pursuant to
this Section 1.7) is greater than Estimated Closing Net Current Assets, WJ
-----------
shall, within three (3) business days after Closing Net Current Assets are
finally determined pursuant to this Section 1.7, pay to Pilkington, in
-----------
immediately available funds, such excess. If Closing Net Current Assets are less
than Estimated Closing Net Current Assets, Pilkington shall, within three (3)
business days after Closing Net Current Assets are finally determined pursuant
to this Section l.7, pay to WJ, in immediately available funds, such shortfall.
-----------
(j) If Actual CAPEX is less than the lesser of (i) the Estimated CAPEX
or the Target CAPEX, Pilkington shall, within three (3) business days after
Actual CAPEX is finally determined pursuant to this Section 1.7, pay to WJ, in
-----------
immediately available funds, such shortfall.
(k) Without duplication, all amounts owed pursuant to this Section 1.7
-----------
shall include interest, from and excluding the Closing Date to and including the
date of payment, at the prime rate announced by Bankers Trust Company from time
to time, calculated on the basis of a 365-day year.
1.8 Other Purchase Price Ad
-----------------------
(a) The cash portion of the Purchase Price shall also be decreased
dollar-for-dollar to the extent necessary to satisfy in full all of the Contact
Lens Products Business' liabilities, costs or obligations (except to the extent
reserved on the statement of Closing Net Current Assets or to the extent such
liabilities, costs, or obligations are required to be paid by Seller or the
Seller Affiliates pursuant to this Agreement) (i) relating to or arising from
its European Restructuring Activities up to, but not exceeding, $7,319,000 less
any amounts
-10-
<PAGE>
expended on such restructuring activities on or prior to the Closing Date
("European Restructuring Costs"), (ii) except as included in European
Restructuring Activities, relating to or arising from any employee terminations
effected or initiated on or prior to the Closing and any employment separation
agreements entered into on or prior to the Closing, (iii) for short-term and
long-term indebtedness for borrowed money and all other long-term liabilities,
including any accrued interest related thereto and all prepayment premiums and
penalties incurred in connection with any prepayment thereof in connection with
the transactions contemplated by this Agreement, and (iv) for the amount then
outstanding at the Closing Date under the intercompany loan described in Section
4.10 hereof (the reduction required by this subclause (iv) shall be calculated
at the exchange rate in effect on the Closing Date as published in The Wall
Street Journal, Eastern edition). In the event the liabilities, costs and
obligations referred to in the preceding sentence are not satisfied in cash on
or prior to the Closing Date, the amount necessary (as of the close of business
on the Closing Date) to satisfy in full such liabilities, costs and obligations
shall be deemed to be equal to the aggregate amount of accruals and reserves
recorded in the Estimated Closing Balance Sheet. Except with respect to the
European Restructuring Costs, if the aggregate amount of such liabilities, costs
and obligations is later determined to be greater than the deemed amount
described in the preceding sentence, then Pilkington shall, within three (3)
business days after such actual amount is determined, pay to WJ, in immediately
available funds, the amount of such excess (which amount shall be treated by the
parties as a reduction to the Purchase Price). Without duplication, all amounts
owed pursuant to the preceding sentence shall include interest, from and
excluding the Closing Date to and including the date of payment, at the prime
rate announced by Bankers Trust Company from time to time, calculated on the
basis of a 365-day year.
(b) The calculation of any adjustment required pursuant to this
Section 1.8, as well as any disputes which may arise in connection therewith,
- -----------
shall be governed by the procedural mechanisms and dispute resolution mechanisms
set forth in Section 1.7 (e.g., any dispute shall be submitted to the
-----------
Independent Auditor) of this Agreement (including but not limited to the
procedural estimate mechanisms contemplated in Section 1.7(c)).
--------------
1.9 Allocation of Purchase Price. The Purchase Price to be paid by Purchaser
----------------------------
for the Acquired Assets and the Acquired Stock shall be allocated as
provided on Schedule 1.9, and that allocation shall be reported by both
------------
Purchaser and the Purchaser Affiliates, and Seller and the Seller
Affiliates to all applicable taxing authorities.
1.10 Foreign Agreements. Subject to the provisions of Section 6.10, Pilkington
------------------ ------------
and WJ shall pursuant to, and in accordance with, the terms of this
Agreement enter into, or cause the Seller Affiliates or the Purchaser
Affiliates, as the case may be, to enter into, on or prior to the Closing
Date, separate agreements (the "Foreign Agreements") for the purchase and
sale of (i) the assets and liabilities of PD, as more particularly
described in this Article 1, and (ii) the Acquired Stock of PBH Services,
---------
PBH NV,
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<PAGE>
PBH France, PBH BV, PBH SpA, PBH Ltd., and Diffractive (the "Non-U.S.
Subsidiaries"). The Foreign Agreements shall be in substantially the
form attached hereto as Exhibits B-1, B-2, or C, as appropriate, with
such modifications as are necessary and appropriate as a result of
differences in local law, in order to maintain the same legal
meaning, effect and risk allocation as provided for in this
Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTEES OF SELLER
As of the date hereof and as of the Closing Date, Seller hereby represents
and warrants to Purchaser the following:
2.1 Organization and Standing. Each of the Acquired Subsidiaries and PD
-------------------------
is a corporation duly organized, validly existing, and in good
standing under the laws of its jurisdiction of incorporation as
described on Schedule 2.1. hereto (to the extent such concept is
------------
relevant in such jurisdiction). Each of the Acquired Subsidiaries has
all necessary corporate power and authority to own its property and to
engage in the Contact Lens Products Business throughout the world in
which it is presently engaged. PD has all necessary corporate power
and authority to own and operate all of the Acquired Assets and to
engage in the Contact Lens Products Business as currently conducted by
PD. Each of the Acquired Subsidiaries and PD is qualified to do
business as a foreign corporation in all jurisdictions where the
nature of its business requires such qualification.
2.2 Authority of Seller. Seller has full right, power and authority to
-------------------
enter into this Agreement, and Seller and each Seller Affiliate has or
will have full right, power and authority to enter into each
agreement, document and instrument to be executed and delivered by it
pursuant to or as contemplated by this Agreement and to carry out the
transactions contemplated hereby and thereby on its part to be
performed. The execution, delivery, and performance by Seller of this
Agreement and by Seller and the Seller Affiliates of each such other
agreement, document and instrument has been or will be duly authorized
by all necessary corporate action of Seller or such Seller Affiliate
and no other corporate action on the part of Seller or such Seller
Affiliate is required in connection therewith. This Agreement and each
agreement, document and instrument to be executed and delivered by
Seller or any of the Seller Affiliates pursuant to or as contemplated
by this Agreement constitute, or will when executed and delivered
constitute, valid and binding obligations of Seller or such Seller
Affiliate, enforceable in accordance with their respective terms,
subject to the application by a court of general principles of equity
and to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws. Except as disclosed on
any schedule to this Agreement, the execution, delivery and
performance by Seller of this Agreement and by Seller and the Seller
Affiliates of
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<PAGE>
each such other agreement, document and instrument: (i) do not and
will not violate any provision of the charter or by-laws of Seller,
the Seller Affiliates, or the Acquired Subsidiaries; (ii) do not and
will not violate any currently effective laws, rules, or regulations
of the United States or any state or other jurisdiction, applicable to
Seller, the Seller Affiliates, the Acquired Subsidiaries or PD or
require Seller, the Seller Affiliates or the Acquired Subsidiaries or
PD to obtain any approval, consent or waiver of, or make any filing
with, any person or entity (governmental or otherwise) that has not
been obtained or made and (iii) do not and will not (A) conflict with
or result in the breach of any of the provisions of, (B) constitute a
default under, (C) result in the violation of, (D) give any third
party the right to terminate or accelerate (including after the giving
of notice or lapse of time or both) any obligation under, or (E)
result in the creation of any mortgage, pledge, security interest,
conditional sale or other title retention agreement, encumbrance,
lien, easement, option, debt, charge, claim or restriction of any kind
or nature (collectively, "Liens") upon the Acquired Stock or the
-----
Acquired Assets under any indenture, mortgage, lease, loan agreement
or instrument by which Seller, the Seller Affiliates, PD or any of the
Acquired Subsidiaries are currently bound or affected.
2.3 Ownership of Capital Stock: Related Rights.
------------------------------------------
(a) The authorized and issued capital stock of each Acquired
Subsidiary, (collectively constituting the Acquired Stock) is set forth on
Schedule 2.3 hereto. All of the Acquired Stock is owned by Seller, the Seller
Affiliates, or one of Seller's nominees as disclosed on Schedule 2.3 hereto and
------------
has been duly authorized, validly issued and is fully paid and nonassessable.
Upon delivery to Purchaser or the Purchaser Affiliates at the Closing of the
certificates representing the Acquired Stock duly endorsed in blank for transfer
or with stock powers attached duly executed in blank, or upon the execution of
such other documents as are required for the transfer of shares in the
respective jurisdiction of incorporation, against delivery of the consideration
therefor described in Article 1 hereof, good and valid title to the Acquired
Stock shall be transferred to Purchaser or the Purchaser Affiliates, free and
clear of any Liens.
(b) Except as set forth on Schedule 2.3 hereto, there are no
------------
outstanding subscriptions, options, warrants, obligations, agreements,
arrangements or commitments of any kind for or relating to the issuance, or sale
of, or outstanding securities convertible into or exchangeable for, any shares
of capital stock of any class or other equity interest of the Acquired
Subsidiaries. There are no preemptive rights, rights of first refusal or similar
rights to acquire the Acquired Stock in connection with the transactions
contemplated by this Agreement or otherwise. Except as provided in Schedule 2.3
------------
hereto, there are no restrictions on the transfer of the Acquired Stock by
Seller or the Seller Affiliates, other than those imposed by relevant state,
federal, national, or foreign securities laws. The Acquired Subsidiaries have
no obligation to purchase, redeem or otherwise acquire any of the Acquired
Stock, and there are no voting trusts or proxies binding upon Seller or the
Seller
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<PAGE>
Affiliates relating to any of the Acquired Stock. There are no outstanding or
authorized stock appreciation, phantom stock or similar rights with respect to
any of the Acquired Subsidiaries.
2.4 Subsidiaries. Except as disclosed on Schedule 2.4 hereto, none of the
------------ ------------
Acquired Subsidiaries owns or controls, directly or indirectly, any
capital stock or other securities or any other interest or investment
(whether equity or debt) in any entity.
2.5 Financial Statements. Seller has delivered or will deliver to
--------------------
Purchaser: (i) the audited consolidated balance sheet for the Contact
Lens Products Business as of March 31, 1996, and the related audited
consolidated statements of operations and cash flows for the fiscal
year then ended (collectively, the "U.S. Statements"), which U.S.
Statements have been or will be prepared in accordance with United
States generally accepted accounting principles ("United States
GAAP"), consistently applied; and (ii) the consolidated balance sheet
for the Contact Lens Products Business as of March 31, 1996 (the
"Latest Balance Sheet") and the related consolidated statements of
operations for the fiscal year then ended (collectively, the " U. K.
Statements "), which U.K. Statements have been prepared in accordance
with U.K. GAAP, consistently applied. The U.K. Statements are attached
hereto as Schedule 2.5. The U.K. Statements and the U.S. Statements
------------
shall collectively be referred to herein as the "Financial
Statements." The Financial Statements present or will present fairly
and accurately, in all material respects, as of their respective times
and periods, the financial condition and results of operations and
cash flows of the Contact Lens Products Business, for such times and
periods, and are or will be correct and complete in all material
respects, and are or will be consistent with the books and records of
the Acquired Subsidiaries and PD.
2.6 Labor and Employment Matters. Except as disclosed on Schedule 2.6
---------------------------- ------------
hereto, none of the Acquired Subsidiaries or, with respect to the
Contact Lens Products Business, PD, is a party to any collective
bargaining agreement with any labor union or association; there are no
discussions, negotiations, demands, or proposals that are pending or
that have been conducted or made with or by any labor union or
association; and there are no pending or, to the Seller's or the
Seller Affiliates' knowledge, threatened labor disputes, strikes, or
work stoppages. Except as disclosed on Schedule 2.6 hereto, each of
------------
the Acquired Subsidiaries and, with respect to the Contact Lens
Products Business, PD, is in Material (as defined in Section 11. 22
----------
hereof) compliance with all foreign, federal, state, and local laws
respecting employment and employment practices, terms and conditions
of employment, and wages and hours, that in anyway relate to the
Employees (as defined in Section 2.18 below).
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<PAGE>
2.7 Title and Condition of Acquired Assets.
--------------------------------------
(a) Except as otherwise disclosed on Schedule 2.7 hereto and excluding
------------
the Excluded Assets, (i) each Acquired Subsidiary has good and marketable title
to its respective tangible property used in the Contact Lens Products Business
and (ii) PD has good and marketable title to the Acquired Assets, in each case
free and clear of any and all Liens; provided that the foregoing representation
and warranty shall not include any representation or warranty regarding Real
Property or Intellectual Property, which are covered by Sections 2.9 and 2.16,
------------ ----
respectively. For purposes of this Agreement, "Acquired Subsidiaries' Assets"
shall mean all tangible and intangible property used in the Contact Lens
Products Business. All of the Acquired Subsidiaries' Assets and the Acquired
Assets are in good operating condition and repair, normal wear and tear
excepted.
(b) The Acquired Subsidiaries' Assets and the Acquired Assets include
all assets used by the Acquired Subsidiaries and PD in the operation of the
Contact Lens Products Business. Seller represents and warrants that (i) the
level and category of transitional services to be provided to the Contact Lens
Products Business pursuant to the Transition Services Agreement (as hereinafter
defined) are sufficient to operate the Contact Lens Products Business as it is
currently conducted, and (ii) the price or cost of each transitional service to
be provided to the Contact Lens Products Business in the Transition Services
Agreement is based on the direct actual historical price or cost of such service
and is reflected in the Financial Statements.
2.8 No Material Change. Except as disclosed on Schedule 2.8 hereto, there
------------------ ------------
have not been any:
(a) Transactions by any Acquired Subsidiary or PD affecting the
Contact Lens Products Business since December 31, 1995, except in the ordinary
course of business;
(b) A material and adverse effect upon the business, assets, financial
condition, or operating results of the Contact Lens Products Business since
March 31, 1996 (a "Material Adverse Change");
(c) Labor disputes materially and adversely affecting the Contact Lens
Products Business since December 31, 1995;
(d) Amendment or termination of any contract, agreement, or license
material to the Contact Lens Products Business or to which the Contact Lens
Products Business, the Acquired Subsidiaries' Assets or Acquired Assets are
subject since March 31, 1996, except in the ordinary course of business as
conducted on that date;
-15-
<PAGE>
(e) Citations received for any violations of the Federal Occupational
Safety and Health Act of 1970 or any rules or regulations promulgated thereunder
with respect to the Contact Lens Products Business since December 31, 1995;
(f) Waiver or release of any right or claim of any Acquired Subsidiary
or, with respect to the Contact Lens Products Business, of PD, since December
31, 1995, except in the ordinary course of business;
(g) Sales, transfers, or disposals of, or agreements to sell,
transfer, or otherwise dispose of any of the Acquired Subsidiaries' Assets or
the Acquired Assets, since December 31, 1995, except in the ordinary course of
business;
(h) Agreements entered into granting any rights to purchase any of the
Acquired Subsidiaries' Assets or the Acquired Assets (including management and
control thereof), or requiring the consent of any party to the transfer and
assignment of the Acquired Subsidiaries' Assets or the Acquired Assets
(including management and control thereof) since December 31, 1995, except in
the ordinary course of business;
(i) Grants of any bonuses or any wage or salary increase to any
employee, officer or director of the Contact Lens Products Business, or any
other material change in employment terms for any such employee, officer or
director since December 31, 1995, other than grants or increases in the ordinary
course of business;
(j) Grants of any increases in, or amendments to or terminations of
any existing employee benefit plan, program, policy or arrangement or adoption
of any new employee benefit plan or arrangement of the Acquired Subs,.diaries
or, with respect to the Contact Lens Products Business, of PD, since March 31,
1996;
(k) Changes to any advertising or promotional programs of the Acquired
Subsidiaries or, with respect to the Contact Lens Products Business, of PD,
since December 31, 1995, other than in the ordinary course of business;
(l) Changes in any sales practices or credit terms of the Acquired
Subsidiaries or, with respect to the Contact Lens Products Business, of PD,
since December 31, 1995, except in the ordinary course of business; or
(m) Agreement or understanding whether in writing or otherwise, for
any of the Acquired Subsidiaries or, with respect to the Contact Lens Products
Business for PD to take any of the actions to do any of the things described in
the preceding clauses (a) through (1) since December 31, 1995.
-16-
<PAGE>
2.9 Real Property.
-------------
(a) Schedule 2.9 hereto correctly identifies all real property leased
------------
or subleased (as lessee or lessor) by any of the Acquired Subsidiaries or, with
respect to PD, exclusively in connection with the Contact Lens Products Business
(the "Leased Property"), and Seller has delivered, or caused to be delivered, to
Purchaser all binding leases, agreements, and subleases, and any amendments
thereto with respect to such Leased Property (the "Leases"). The Leases are in
full force and effect, and there are no existing defaults or any events that
with the passage of time or the giving of notice, or both, would constitute an
event of default by any of the Acquired Subsidiaries or PD under any Lease or,
to Seller's and the Seller Affiliates' knowledge, by any other party to any
Lease. Except as described on Schedule 2.9, no consent, waiver, approval or
------------
authorization is required from the landlord or lessee under any Lease as a
result of the execution of this Agreement or the consummation of the
transactions contemplated hereby.
(b) Schedule 2.9 hereto contains a complete and accurate legal
------------
description of each parcel of real property owned by the Acquired Subsidiaries
or, with respect to PD, exclusively in connection with the Contact Lens Products
Business (the "Owned Property"; the Leased Property and the Owned Property are
collectively referred to as the "Real Property").
(c) The owner or lessee identified in Schedule 2.9 hereto has good and
------------
marketable title to the Owned Property or a good and valid leasehold interest in
the Leased Property, in each case free and clear of any Lien except for
installments of real property taxes not yet due and payable, special assessments
not yet delinquent, and recorded easements, covenants, and other restrictions
that do not adversely affect the conduct of the Contact Lens Products Business
and that have not been violated (the "Permitted Encumbrances"). There are no
pending or, to Seller's and the Seller Affiliates' knowledge, threatened
condemnation proceedings, lawsuits, or administrative actions relating to the
Real Property. Except as set forth on Schedule 2.9, other than PD and the
------------
Acquired Subsidiaries, there are no parties in possession or parties having any
rights to occupy any of the Real Property.
(d) (i) All improvements made by the Acquired Subsidiaries on the Real
Property have received all approvals of governmental authorities (including
licenses and permits) required in connection with the ownership or operation
thereof, and (ii) all such improvements have been operated and maintained in
Material compliance with applicable laws, rules, and regulations.
(e) There are no outstanding options or rights of first refusal to
purchase the Owned Property, or any portion thereof or interest therein.
2.10 Litigation. Except as set forth on Schedule 2.10 hereto, there are
---------- -------------
no suits, claims, actions, arbitrations, investigations, or
proceedings, now pending, or, to the Seller's
-17-
<PAGE>
and the Seller Affiliates' knowledge, threatened against any of
the Acquired Subsidiaries, the Acquired Assets or the Acquired
Stock or, with respect to PD, Seller, or the Seller Affiliates,
relating to the Contact Lens Products Business, before any court,
arbitration, administrative or regulatory body, or any
governmental or quasi-governmental agency. Except as set forth on
Schedule 2.10 hereto, none of the Acquired Subsidiaries, PD, the
-------------
Acquired Assets, the Acquired Stock, Seller, nor the Seller
Affiliates (in the case of Seller, the Seller Affiliates, and PD,
with respect to the Contact Lens Products Business) is subject to
any continuing court or administrative order, writ, injunction, or
decree and none of the Seller, the Seller Affiliates, PD (in the
case of Seller, the Seller Affiliates, and PD, with respect to the
Contact Lens Products Business), or the Acquired Subsidiaries is
in default with respect to any order, writ, injunction, or decree
of any court or federal, state, municipal, or other governmental
department, commission, board, agency, or instrumentality.
2.11 Consents. Except as otherwise disclosed on Schedules 2.9 and 2.11
-------- ----------------------
hereto, none of Seller, the Seller Affiliates, the Acquired
Subsidiaries, or PD is required to make any filing with, or obtain
any permit, authorization, consents or other approvals of any
court, arbitrational tribunal, or regulatory authority or
governmental agency, bureau, or authority, or other person,
including any licensor, lender, vendor, or lessor in order to
effect the transaction contemplated hereby, other than any filing,
permit, authorization, consent, or approval that if not obtained
or made would not have a Material adverse effect on the Contact
Lens Products Business or the Acquired Assets or the Acquired
Stock or on the ability of the Seller or the Seller' Affiliates to
consummate the transactions contemplated by this Agreement.
2.12 Taxes. All tax reports and returns to be filed in respect of any
-----
of Acquired Subsidiaries or, with respect to the Contact Lens
Products Business, PD, or the Acquired Assets or the Acquired
Stock have been filed and all taxes shown to be due on such tax
returns or reports or claimed to be due from any of the Acquired
Subsidiaries or, with respect to the Contact Lens Products
Business, PD, or the Acquired Assets or the Acquired Stock by
foreign, federal, state, or local taxing authorities (including,
without limitation, those due in respect of properties, income,
franchise, licenses, sales, and payrolls, as well as any interest
or penalties thereon) (the "Taxes") have been paid. Neither of the
Seller nor the Seller Affiliates has any knowledge of any state of
facts which would constitute grounds for the assessment of any
Material tax liability against any of the Acquired Subsidiaries
or, with respect to the Contact Lens Products Business, PD, with
respect to any tax reports and returns filed. None of the Acquired
Subsidiaries or PD has caused or permitted a change in any method
of accounting for tax purposes during or applicable to its current
tax year which would render inaccurate, misleading, or incomplete
the information concerning taxes set forth in or referred to in
this Section 2.12, or which would have an adverse effect on the
------------
Contact Lens Products Business or the Acquired
-18-
<PAGE>
Assets or the Acquired Stock for any period ending on or before
the Closing Date. Except as otherwise disclosed on Schedule 2.12
-------------
hereto, (i) no claim has been made during the past three (3)
fiscal years by a taxing authority in a jurisdiction where an
Acquired Subsidiary does not file tax returns or reports that such
entity is or may be subject to Taxes assessed by such
jurisdiction; (ii) the Acquired Subsidiaries have not made any
payments, or are or shall become obligated (under any contract
entered into on or before the Closing Date) to make any payments,
that shall be nondeductible under Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code") (or any
corresponding provision of state, local or foreign income Tax
law); and (iii) the Acquired Subsidiaries will not be required as
a result of (A) a change in method of accounting for a taxable
year ending on or prior to the Closing Date, (B) any "closing
agreement," as described in Section 7121 of the Code (or any
corresponding provision of state, local or foreign income Tax
law), or (C) any deferred intercompany gain described in Treasury
Regulation (S) 1. 150213 or any excess loss account described in
Treasury Regulation (S) 1. 1502-19 (or any corresponding or
similar provision or administrative rule of federal, state, local
or foreign income tax law) to include any item of income or
adjustment in taxable income or exclude any item of deduction from
taxable income for any taxable year or portion thereof beginning
after the Closing Date. PBH International has regular United
States federal income Tax net operating loss carryforwards equal
to at least $10 million as of March 31, 1996. There are not, and
since April 1, 1993 have not been, any written agreements that
memorialize any purchasing arrangements between or among any of
the Acquired Subsidiaries or between or among any of the Acquired
Subsidiaries and, with respect to the Contact Lens Products
Business, PD, that would be inconsistent with and would adversely
impact the conversion of any Acquired Subsidiary to a
commissionaire or agent.
2.13 Licenses and Permits. Except as provided on Schedule 2.13, each of
-------------------- -------------
the Acquired Subsidiaries and PD has, in fall force and effect,
all of the foreign, federal, state, or local governmental
licenses, franchises, certificates, orders, approvals,
registrations, and permits (collectively, the "Permits") that are
necessary to the operation of the Contact Lens Products Business
by the Acquired Subsidiaries and PD. Schedule 2.13 contains a
-------------
listing of all Material Permits. Each of the Acquired Subsidiaries
and PD is in compliance with the terms and conditions of the
Permits on Schedule 2.13 and has received no notices that it is in
-------------
violation of any of the terms or conditions of such Permits.
2.14 Compliance with Laws. Except as provided on Schedule 2.14:
-------------------- -------------
(a) None of the Acquired Subsidiaries or PD is in default under or in
violation of any applicable statute, law, ordinance, decree, order, rule,
regulation, franchise, permit, premarket approvals or license of any
governmental body, which default or violation has or may have a Material adverse
effect upon the Acquired Assets or the Acquired Stock, or
-19-
<PAGE>
which would prohibit or impair the Seller's performance of this Agreement or the
transactions contemplated hereby;
(b) Since April 1, 1993, neither the Acquired Subsidiaries nor PD has
received any notice of, or is subject to, any adverse inspection, finding of
deficiency, finding of non-compliance, compelled or voluntary recall,
investigation, penalty, fine, sanction, assessment, request for corrective or
remedial action or other compliance or enforcement action, in each case relating
to any products or goods designed, manufactured, merchandised, distributed,
serviced or sold (or proposed to be designed, manufactured, merchandised,
distributed, serviced or sold) by the Contact Lens Products Business on or prior
to the Closing Date (the "Products") or to the facilities in which the Products
--------
are designed, manufactured, merchandised, serviced, distributed, sold, delivered
or handled by any of the Acquired Subsidiaries or PD, by the Food and Drug
Administration (the "FDA"), or by any other federal, state, local or foreign
---
authority having or asserting responsibility for the regulation of the Products
("Other Authorities");
-----------------
(c) Each of the Acquired Subsidiaries and PD has obtained all
necessary approvals, registrations and authorizations from, has made all
necessary and appropriate applications and other submissions to, and has
prepared and maintained all records, studies and other documentation needed to
satisfy and demonstrate compliance with the requirements of the FDA and Other
Authorities for its current business activities relating to the Products;
(d) Each Acquired Subsidiary and PD is in compliance in all Material
respects with all applicable regulations and requirements of the FDA and Other
Authorities relating to the Products, including without limitation any good
manufacturing or handling practices, requirements for demonstrating and
maintaining the safety and efficacy of the Products, export requirements,
certificates of export, requirements for investigating customer complaints and
inquiries, labeling requirements and protocols, shipping requirements,
monitoring requirements, packaging or repackaging requirements, laboratory
controls, sterility requirements, inventory controls and storage and warehousing
procedures;
(e) All Products included in the inventory of the Acquired
Subsidiaries and PD being conveyed to Purchaser or the Purchaser Affiliates at
Closing comply in all respects with current applicable FDA requirements and were
handled by each Acquired Subsidiary and PD in conformity with current applicable
FDA requirements and
(f) No Acquired Subsidiary nor PD has received any written
notification, which remains Unresolved as of the .ate hereof, from the FDA, FDA
personnel or Other Authorities indicating that any Product is unsafe or
ineffective for its intended use.
-20-
<PAGE>
2.15 Contracts.
---------
(a) Except for contracts, commitments, plans, agreements and
licenses described in Schedule 2.15 hereto (true and complete copies of
-------------
which have been delivered to the Purchaser), none of the Acquired
Subsidiaries nor, with respect to the Contact Lens Products Business, PD,
is a party to or subject to:
(i) any plan or contract or agreement providing for bonuses,
pensions, options, stock purchases, deferred compensation, retirement
payments, profit sharing, collective bargaining or the like, or any
contract or agreement with any labor union;
(ii) any employment contract or independent contractor
agreement which requires the payment of more than $30,000 annually or
which is not terminable within 30 days by such Acquired Subsidiary or
PD without liability for any penalty or severance payment;
(iii) any contract or agreement for the purchase of any
commodity, material or equipment, except purchase orders in the
ordinary course for less than $10,000 (as disclosed up to and
including June 17, 1996);
(iv) any other contracts or agreements creating any
obligations of such Acquired Subsidiary or PD of $50,000 or more
annually with respect to any such contract or agreement not
specifically disclosed elsewhere under this Agreement;
(v) any contract or agreement providing for the purchase of
all or substantially all of its requirements of a particular product
from a supplier;
(vi) any contract or agreement for the sale, lease or license
of Acquired Subsidiary Assets or Acquired Assets not made in the
ordinary course of business;
(vii) any contract with any sales agent, supplier, or
distributor of products of such Acquired Subsidiary or PD that is not
terminable without penalty within ninety (90) days;
(viii) any indenture, mortgage, promissory note, loan agreement,
guaranty or other agreement or commitment for the borrowing of money;
(ix) any contract or agreement with Seller, any of the Seller
Affiliates, or any officer, employee, director or stockholder of
Seller, any of the Seller Affiliates, any Acquired Subsidiary or PD
or with any persons or organizations controlled by or affiliated with
it;
-21-
<PAGE>
(x) any license, sublicense or royalty agreement which
requires the payment of more than $50,000 annually or is otherwise
material to the Contact Lens Products Business;
(xi) any consulting, promotional or advertising agreement
(including, without limitation, any agreement that obligates any
Acquired Subsidiary or PD to endorse or promote the products of any
unaffiliated party) that requires the payment of more than $30,000
annually or that is not terminable within 30 days by such Acquired
Subsidiary or PD without liability for any penalty or severance
payment; or
(xii) any contract or agreement which prohibits it from freely
engaging in business anywhere in the world.
(b) No condition or event or fact exists which, with notice, lapse
of time or both would constitute a default under any Contract (as
hereinafter defined) on the part of the Acquired Subsidiaries or PD or, to
the knowledge of Seller or the Seller Affiliates, any other party thereto.
Except as disclosed on Schedule 2.15: (i) none of the other parties to such
-------------
Contracts has given notice to PD or any Acquired Subsidiary that it intends
to terminate or materially alter the provisions of such Contracts; and (ii)
neither PD nor any Acquired Subsidiary has given notice to any other party
that it intends to terminate or materially alter the provisions of such
Contracts.
All contracts, agreements, commitments, and arrangements required to be
disclosed on Schedule 2.15 are referred to herein as "Contracts".
-------------
2.16 Intellectual Property.
---------------------
(a) PD and the Acquired Subsidiaries own all right, title and
interest in and to, or have an effective written license to use, all of the
Intellectual Property (as defined below) necessary for or otherwise used in
the operation of the Contact Lens Products Business as presently conducted
and as presently proposed to be conducted by PD and the Acquired
Subsidiaries; and each item of Intellectual Property owned or used by PD
and the Acquired Subsidiaries in the operation of the Contact Lens Products
Business immediately prior to the Closing hereunder will be owned or
available for use by the Purchaser or the Purchaser Affiliates on identical
terms and conditions immediately subsequent to the Closing hereunder.
(b) Patents and Patent Applications. Schedule 2.16 hereto sets
forth all patents and patent applications owned by the Acquired
Subsidiaries, PD, Seller or the Seller Affiliates and used in the operation
of the Contact Lens Products Business. With respect to all such patents and
patent applications, except as specifically set forth in Schedule 2.16
hereto:
-22-
<PAGE>
(1) The entity listed in Schedule 2.16 hereto as the owner of any
-------------
patent or patent application is the sole and exclusive owner of the entire
right, title and interest in and to such patent or patent application and
any and all related know-how, and has the right to assign or will arrange
on or prior to Closing or as soon as practicable thereafter, at no
additional cost to Purchaser, the Purchaser Affiliates or the Acquired
Subsidiaries, for the assignment and transfer of the same to one of the
Acquired Subsidiaries or WJ GmbH, as the case may be;
(2) Such patents and patent applications and related know-how are
free of any encumbrances, including, without ',imitation, Liens, licenses,
judgments and security interests, and all such patents and patent
applications are in full force and effect; and
(3) To Seller's knowledge, none of such patents or patent
applications are the current subject of any interference, opposition,
reissue or reexamination proceeding.
(c) Intellectual Property Licenses: Schedule 2.16 hereto sets forth
------------------------------ -------------
all license agreements (other than computer software license agreements which
are described in the succeeding sentence) owned or used by the Acquired
Subsidiaries or, with respect to Seller, PD, or the Seller Affiliates, used in
the operation of the Contact Lens Products Business and all license agreements
granted by PD or the Acquired Subsidiaries. Schedule 2.16 also sets forth all
-------------
Material computer software owned, licensed or used on the SAP system by the
Acquired Subsidiaries or, with respect to PD, used in the operation of the
Contact Lens Products Business. With respect to all such license agreements that
relate to the Intellectual Property used by the Acquired Subsidiaries or, with
respect to PD, used in the operation of the Contact Lens Products Business,
except as specifically set forth in Schedule 2.16 hereto, all of such license
-------------
agreements have been fully executed and are in full force and effect as of the
date hereof, and, to Seller's and the Seller Affiliates' knowledge, no party to
any such license agreement is in material breach thereof.
(d) Consulting Agreements: Except as set forth on Schedule 2.16
---------------------
hereto, there are no consulting agreements in effect which are binding upon any
Acquired Subsidiary, or with respect to the Contact Lens Products Business, PD.
(e) Research and Development Projects: Schedule 2.16 hereto sets forth
--------------------------------- -------------
all current research and development (R&D) projects relating primarily to the
Contact Lens Products Business. With respect to all such R&D projects,
Schedule 2.16 sets forth a brief description of the objective of the R&D project
- -------------
and a summary of the work conducted.
(f) Trademarks, Copyrights, Etc.: Schedule 2.16 hereto sets forth all
---------------------------- -------------
copyright and trademark registrations and applications relating to the Contact
Lens Products Business (the "Trademarks"). With respect to the Trademarks,
except as stated in Schedule 2.16
-------------
-23-
<PAGE>
hereof, the Acquired Subsidiaries or PD are the sole and exclusive owners of the
entire right, title and interest in and to the Trademarks, and have the right to
assign and transfer the same to Purchaser or the Purchaser Affiliates under this
Agreement. In this regard, Seller represents and warrants that the Trademarks
are free of any encumbrances, including, without limitation, liens, licenses,
judgments, restrictions and/or security interests and that, to Seller's
knowledge, no Trademark is the current subject of any interference or opposition
proceeding before any court or any administrative agency.
(g) Except as set forth on Schedule 2.16 hereto, neither PD nor Seller
-------------
nor the Seller Affiliates nor any of the Acquired Subsidiaries is aware of any
infringement or misappropriation by any third party with respect to the
Intellectual Property owned or used by the Acquired Subsidiaries or, with
respect to PD, used in the operation of the Contact Lens Products Business; none
of the Acquired Subsidiaries nor, with respect to the Contact Lens Products
Business, PD, has received any claim from any third party that it has infringed,
misappropriated or otherwise conflicted with any Intellectual Property rights of
any third party relating to the Contact Lens Products Business, including,
without limitation, any demand or request that PD or any of the Acquired
Subsidiaries license any such rights from any third party; and neither PD nor
any of the Acquired Subsidiaries has made any claim against any third party that
such third party has infringed, misappropriated or otherwise conflicted with any
Intellectual Property rights of any Acquired Subsidiary or, with respect to the
Contact Lens Products Business, PD.
(h) As used herein, "Intellectual Property" shall mean: all patents;
all trademarks, service marks, trade dress and trade names and all the goodwill
associated therewith; all copyrights; all registrations, applications and
renewals for any of the foregoing; all inventions and invention disclosures; all
trade secrets, confidential information and know-how; and all other proprietary
rights, including, without limitation, computer software, data, data bases and
related documentation.
2.17 Environmental Matters. Except as disclosed on Schedule 2.17 hereto:
--------------------- -------------
(a) The Acquired Subsidiaries and, with respect to the Contact Lens
Products Business, PD, as well as all property, facilities, machinery, or
equipment owned, operated or used by any of the Acquired Subsidiaries or, with
respect to the Contact Lens Products Business, PD, and all of the Acquired
Subsidiaries' Assets and the Acquired Assets have complied and are in compliance
with all applicable Environmental, Health, and Safety Laws (defined below),
including but not limited to laws relating to the generation, use, sale,
storage, handling, transfer, recycling, or disposal of any Hazardous Substance
(defined below).
(b) Neither Seller nor any Seller Affiliate nor PD (each with respect to
the Contact Lens Products Business) nor any of the Acquired Subsidiaries has
received any notice alleging violation of or liability under any Environmental,
Health, and Safety Laws
-24-
<PAGE>
from any governmental authority or third party; and no claim, action, or
lawsuit by any public or private entity has been received or filed against
any of the Acquired Subsidiaries or, with respect to the Contact Lens
Products Business, PD, relating directly or indirectly to any violation of
or liability under any of the Environmental, Health, and Safety Laws, and,
to Seller's and the Seller Affiliates' knowledge, no such claim, action, or
lawsuit is threatened.
(c) The Acquired Subsidiaries or PD have obtained all permits
required under Environmental, Health and Safety Laws for ownership or
operation of the Acquired Assets or the Acquired Subsidiaries' Assets; such
permits have been maintained and are in full force and effect; the Acquired
Subsidiaries or PD are in Material compliance with such permits; and (i) as
to the Acquired Assets, such permits will be transferred to Purchaser or
the Purchaser Affiliates at the Closing, except as disclosed on Schedule
--------
2.17 hereto, and (ii) as to the Acquired Subsidiaries, such permits may be
----
relied upon for continued lawful operation of the Contact Lens Products
Business after Closing without transfer, reissuance or other governmental
action for the remainder of the term of such permits, except as disclosed
on Schedule 2.17 hereto.
-------------
(d) None of the Acquired Subsidiaries or PD is in violation of any
decree, order, permit, license, statute, or regulation relating to health,
safety or the environment.
(e) There are no Hazardous Substances at any of the Owned Property,
and at no time prior to the Closing has any spill, release, discharge, or
disposal of Hazardous Substances occurred at, on, under, or from the Owned
Property.
(f) Neither the Acquired Subsidiaries nor PD treats, recycles,
stores or disposes of any Hazardous Substance on-site such as to require
issuance of any governmental permit.
(g) No liens arising under any Environmental, Health, and Safety
Laws have attached to any of the Acquired Assets or the Acquired
Subsidiaries' Assets or the property, facilities, machinery, or equipment
owned, operated or used by any of the Acquired Subsidiaries.
(h) Neither the Acquired Subsidiaries nor, with respect to the
Contact Lens Products Business, PD, has treated, stored, disposed of,
arranged for or permitted the disposal of, or transported, handled, or
released any substance, including without limitation any Hazardous
Substance (or owned or operated any property or facility that has been
contaminated by such substance), in a manner that has given or would give
rise to liabilities, including any liability for response costs, corrective
action costs, personal injury, property damage, natural resources damages
or attorney fees, or any investigative, corrective or remedial obligations,
pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA") or the Solid Waste Disposal
------
Act, as amended ("SWDA") or any other Environmental, Health and Safety
----
Laws.
25
<PAGE>
(i) Neither this Agreement nor the consummation of the transactions
contemplated hereby will result in any obligations for site investigation
or cleanup, or notification to or consent of government agencies or third
parties, pursuant to any of the so-called "transaction-triggered " or
"responsible property transfer" Environmental, Health and Safety Laws.
(j) For purposes of this Section 2.17,
------------
(i) "Environmental. Health, and Safety Laws means the
Comprehensive Environmental Response, Compensation and Liability Act
of 1980, the Resource Conservation and Recovery Act of 1976, the
Occupational Safety and Health Act of 1970, and Part IIA of the
Environmental Protection Act 1990, each as amended prior to the
Closing, together with all other applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and
foreign governments (and all agencies thereof) and all applicable
common law concerning pollution or protection of human health and the
environment, or employee health and safety, including but not limited
to laws relating to emissions, discharges, releases, or threatened
releases of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes into ambient air, surface
water, ground water, or lands, or to internal or external noise
levels, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes; and
(ii) "Hazardous Substance" means, collectively, any petroleum or
petroleum product or byproduct, and any waste, substance, material,
or pollutant referred to or designated as hazardous, toxic, extremely
hazardous, special (pursuant to U.K. law only), flammable, explosive,
radioactive, or words of similar meaning or regulatory effect under
any Environmental, Health, and Safety Laws.
2.18 Employees. Attached hereto as Schedule 2.18 hereto is a list, as of
--------- -------------
June 1, 1996, of names, location, then current annual rates of
salary, and length of service of all the employees of the Acquired
Subsidiaries or, in the case of PD, of all employees whose work
relates exclusively to the Contact Lens Products Business (the
"Employees"). Seller shall, on or prior to the Closing Date, provide
Purchaser with an updated schedule that reflects, as of July 15,
1996, all employees of the Acquired Subsidiaries and all employees of
PD whose work relates exclusively to the Contact Lens Products
Business (all such employees shall be refer-red to as "Continued
Employees").
2.19 Stay Agreements. Attached hereto as Schedule 2.19 is a list of all
--------------- -------------
employment retention, "stay" or similar bonus or incentive stay
agreements, pursuant to which any Acquired Subsidiary or P.") has
agreed to pay stay bonuses and/or special incentive
26
<PAGE>
payments as consideration for the agreement of those Employees to
remain continuously employed with such Acquired Subsidiary or PD
through the closing of a sale of the Contact Lens Products Business.
For purposes of this Agreement, the employment retention, "stay" or
similar bonus or incentive stay agreements required to be disclosed
on Schedule 2.19 hereto are hereinafter referred to as "Stay
-------------
Agreements."
2.20 Employee Benefit Plans.
----------------------
(a) Except as set forth on Schedule 2.20 hereto, neither any
-------------
Acquired Subsidiary, PD, nor any ERISA Affiliate (as defined below)
maintains, or is required to contribute, on behalf of any Employee to any
(i) employee pension benefit plan (as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
(ii) employee welfare benefit plan (as defined in ERISA Section 3(l)), or
(iii) other deferred compensation, stock purchase, stock option, incentive,
bonus, or other plan, program or arrangement that provides compensation or
benefits in connection with employment that are not treated as either an
employee pension benefit plan or an employee welfare benefit plan (all such
plans, arrangements, and programs described in (i) through (iii) are
referred to herein as the "Plans"). For purposes of this Section 2.20, the
------------
term ERISA Affiliate means any Acquired Subsidiary and any trade or
business that is a member of a group of organizations within the meaning of
Section 414(b), (c), (m), or (o) of the Code. All Plans set forth on
Schedule 2.20 hereto, and their related trusts, if any, comply in form and
-------------
have been administered in all Material respects in accordance with the
applicable requirements of ERISA, and all other applicable laws, miles, and
regulations, and any necessary governmental approvals of the Plans have
been obtained. All of the Plans that are maintained outside of the United
States have been maintained and administered in all Material respects in
accordance with all applicable laws and regulations of the countries in
which such plans are maintained.
(b) Neither any Acquired Subsidiary, PD, nor any ERISA Affiliate
has incurred any liability to the Pension Benefit Guaranty Corporation
("PBGC"), the Internal Revenue Service, any multiemployer plan or otherwise
with respect to any Plan currently or previously maintained that has not
been satisfied in full, and no condition exists that presents a Material
risk to the Acquired Subsidiaries, PD or any ERISA Affiliate of incurring
such a liability (other than liability for premiums due the PBGC) that
could reasonably be expected to have any Material adverse effect on
Purchaser or the Purchaser Affiliates on or after the Closing. Neither any
Acquired Subsidiary, PD, nor any ERISA Affiliate has ceased operation at
any facility or withdrawn from any Plan that is subject to Title IV of
ERISA in a manner that could subject them to liability under Section 4062,
4063, or 4064 of ERISA, and to Seller's and the Seller Affiliates'
knowledge, no events have occurred which will give rise to any liability of
either any Acquired Subsidiary, PD, or any ERISA Affiliate to the PBGC
under Title IV of ERISA or which could reasonably be anticipated to result
in any claims being made against the Purchaser or the Purchaser Affiliates
by the PBGC. Neither
27
<PAGE>
any Acquired Subsidiary, PD, nor any ERISA Affiliate has incurred any withdrawal
liability within the meaning of Section 4201 and 4204 of ERISA to any Plan that
is a "multiemployer plan" as such term is defined in Section 3(37) of ERISA.
2.21 Inventory. The inventory relating to the Contact Lens Products
---------
Business is being and has been maintained at levels consistent with
past practices of the Contact Lens Products Business and is adequate
for the continuation of the Contact Lens Products Business as
presently conducted.
2.22 Warranties. Except as set forth on Schedule 2.22 hereto, none of the
---------- -------------
Acquired Subsidiaries or PD has given or made any express warranties
or indemnities to third parties with respect to any products sold or
services performed by such entities relating, to the Contact Lens
Products Business. There is no basis for any present claim against
any of the Acquired Subsidiaries or PD for liability due to any
express or implied warranty or indemnity relating to the Contact Lens
Products Business. All products designed, manufactured, merchandised,
serviced, distributed, sold or delivered by the Contact Lens Products
Business at any time prior to the Closing Date have been in
conformity with all applicable contractual commitments and all
express or implied warranties. Except as set forth in the Closing
Balance Sheet, no liability exists for replacement thereof or other
damages in connection with such sales or deliveries at any time prior
to the Closing Date.
2.23 Brokers and Finders. None of the Seller, the Seller Affiliates, the
-------------------
Acquired Subsidiaries or PD has dealt with any broker, finder, or
other person entitled to any broker's or finder's fee, commission, or
other similar compensation in connection with the transaction
contemplated hereby.
2.24 Insurance. Each of the Acquired Subsidiaries and, with respect to
---------
the Contact Lens Products Business, PD, maintains third party
insurance coverage with respect to its properties and business of
such a nature, with such terms, and covering such risks as a prudent
person would maintain with respect to similar properties and
business. All of such insurance policies are legal, valid, binding
and enforceable and in full force and effect and no Acquired
Subsidiary nor, with respect to the Contact Lens Products Business,
PD, is in breach or default with respect to its obligations under any
insurance policies.
2.25 Officers and Directors: Bank Accounts. Schedule 2.25 attached hereto
------------------------------------- -------------
lists all officers and directors of each Acquired Subsidiary and all
bank accounts of each Acquired Subsidiary (designating each
authorized signatory and the level of each signatory's
authorization).
2.26 Absence of Undisclosed Liabilities. None of the Acquired
----------------------------------
Subsidiaries nor, with respect to the Contact Lens Products Business,
PD, has any debts, liabilities or
28
<PAGE>
obligations of any nature (whether accrued, absolute, contingent, direct,
indirect, perfected, inchoate, unliquidated or otherwise, whether due or to
become due) arising out of transactions entered into at or prior to the
Closing, or any transaction, series of transactions, action or inaction at
or prior to the Closing, any state of facts or condition existing at or
prior to the Closing, or that are not related to the Contact Lens Products
Business (regardless of when any such liability or obligation is asserted),
except (a) liabilities and obligations described on any Schedule to this
Agreement (to the extent that the relevance of such liability or obligation
is reasonably apparent in the Schedule in which such liability or
obligation is disclosed), (b) liabilities and obligations to the extent
specifically reflected and reserved on the Latest Balance Sheet, and (c)
liabilities and obligations which have arisen after March 31, 1996, in the
ordinary course of business or otherwise in accordance with the terms of
this Agreement (none of which relates to any breach of contract, breach of
warranty, tort, infringement, or violation of law or arose out of any
charge, complaint, action, suit, proceeding, hearing, investigation, claim
or demand).
2.27 Investment Representation of Pilkington. In connection with the
---------------------------------------
issuance of the Note to Pilkington Holdings, Inc. hereunder,
Pilkington hereby represents and warrants to WJ that:
(a) Pilkington has had an opportunity to ask questions and receive
answers concerning the terms and conditions of the offering of the Note and
has had full access to such information concerning WJ Holding as Pilkington
has requested;
(b) Pilkington Holdings, Inc. is able to bear the economic risk of
the investment in the Note for an indefinite period of time;
(c) Pilkington Holdings, Inc. is acquiring the Note hereunder for
its own account with the present intention of holding such securities for
investment purposes and has no intention of selling such security in a
public distribution in violation of federal or state securities laws.
2.28 Disclosure. Neither this Article 2 nor any certificate delivered by
----------
Seller or the Seller Affiliates to Purchaser or the Purchaser
Affiliates contains or will contain any untrue statement of a
material fact or omits a material fact necessary to make the
statements contained herein or therein, in light of the circumstances
in which they were made, not misleading.
29
<PAGE>
ARTICLE 3
REPRESENTATIONS AND WARRANTEES OF PURCHASER
As of the date hereof and as of the Closing Date, Purchaser hereby
represents and warrants to Seller the following:
3.1 Organization and Standing. Purchaser and each of the Purchaser
-------------------------
Affiliates is a duly organized and validly existing corporation
in good standing under the laws of the jurisdiction of its
incorporation as described in Schedule 3. 1 hereto (to the extent
such concept is relevant in such jurisdiction). Purchaser and
each of the Purchaser Affiliates has all the requisite corporate
power and authority to engage in the business in which it is
presently engaged. Each of the Purchaser and the Purchaser
Affiliates is qualified to do business as a foreign corporation
in all jurisdictions where the nature of its business requires
such qualification.
3.2 Authority and Restrictions. Purchaser has full right, power and
--------------------------
authority to enter into this Agreement, and Purchaser and each
Purchaser Affiliate has or will have full right, power and
authority to enter into each agreement, document and instrument
to be executed and delivered by it pursuant to or as contemplated
by this Agreement and to carry out the transactions contemplated
hereby and thereby on its part to be performed. The execution and
delivery and performance by Purchaser of this Agreement and by
Purchaser and the Purchaser Affiliates of each such other
agreement, document and instrument has been or will be duly
authorized by all necessary corporate action of Purchaser or such
Purchaser Affiliate and no other corporate action on the part of
Purchaser or such Purchaser Affiliate is required in connection
therewith. This Agreement and each agreement, document and
instrument to be executed and delivered by Purchaser or any of
the Purchaser Affiliates pursuant to, or as contemplated by this
Agreement constitute, or will when executed and delivered
constitute, valid and binding obligations of Purchaser or such
Purchaser Affiliate, enforceable in accordance with their
respective terms, subject to the application by a court of
general principles of equity and to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium, or similar
laws. Except as disclosed on Schedule 3.2 or any other schedule
to this Agreement, the execution, delivery and performance by
Purchaser of this Agreement and by Purchaser and the Purchaser
Affiliates of each such other agreement, document and instrument:
(i) do not and will not violate an,, provision of the charter or
by-laws of Purchaser or the Purchaser Affiliates, (ii) do not and
will not violate any currently effective laws, rules, or
regulations of the United States or any state or other
jurisdiction, applicable to Purchaser or Purchaser Affiliates, or
require Purchaser or the Purchaser Affiliates to obtain any
approval, consent or waiver of, or make any filing with, any
person or entity (governmental or otherwise) that has not been
obtained or made and (iii) do not and will not (A) conflict with
or result in the breach
30
<PAGE>
of any of the provisions of, (B) constitute a default under, (C)
result in the violation of, (D) give any third party the right to
terminate or accelerate (including after the giving of notice or
lapse of time or both) any obligation under, or (E) result in the
creation of any Liens upon any of the material properties or
assets of Purchaser or any of the Purchaser Affiliates under any
indenture, mortgage, lease, loan agreement or instrument by which
Purchaser or Purchaser Affiliates are currently bound or
affected.
3.3 Brokers and Finders. Neither Purchaser nor the Purchaser
-------------------
Affiliates have dealt with any broker, finder, or other person
entitled to any broker's or finder's fee, commission, or other
similar compensation in connection with the transaction
contemplated hereby.
3.4 Litigation. There is no suit, claim, arbitration, investigation,
----------
action, or proceeding entered against, now pending, or, to
Purchaser's or the Purchaser Affiliates' knowledge, threatened
against Purchaser or the Purchaser Affiliates before any court,
arbitration, administrative, or regulatory body or any
governmental agency which could reasonably be expected to
materially impair the ability of Purchaser or the Purchaser
Affiliates to fulfill and perform its obligations under this
Agreement.
3.5 Investment Representations of Purchaser. In connection with the
---------------------------------------
purchase of the Acquired Stock hereunder, Purchaser, on behalf of
itself and the Purchaser Affiliates, hereby represents and
warrants to Seller that:
(a) Purchaser has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of
the Acquired Stock, has had full access to such other information
concerning the Acquired Subsidiaries as Purchaser has requested and
possesses substantial information about, and familiarity with, the
Acquired Subsidiaries as a result of the information provided to
Purchaser;
(b) Purchaser or the Purchaser Affiliates are able to bear the
economic risk of the investment in the Acquired Stock for an
indefinite period of time; and
(c) Purchaser or the Purchaser Affiliates are acquiring the
Acquired Stock hereunder for their own account with the present
intention of holding such securities for investment purposes and has
no intention of selling such security in a public distribution in
violation of federal or state securities laws.
3.6 Consents. Except as otherwise disclosed on Schedule 3.6 hereto,
-------- ------------
neither Purchaser nor the Purchaser Affiliates nor Bain Capital,
Inc. is required to make any filing with, or obtain any permit,
authorization, consents or other approvals of any court,
arbitrational tribunal, or regulatory authority or governmental
agency, bureau, or authority, or other person, including any
lender, vendor, or lessor in order to effect
31
<PAGE>
the transaction contemplated hereby, other than any filing,
permit, authorization, consent, or approval that if not obtained
or made would not have a Material adverse effect on the ability
of Purchaser or the Purchaser Affiliates to consummate the
transactions contemplated by this Agreement.
3.7 Knowledge of Claims. Neither the Purchaser nor any Purchaser
-------------------
Affiliate has any Knowledge (as hereinafter defined) of any
breach of any representation or warranty under this Agreement by
Seller or the Seller Affiliates. For purposes of this Section
-------
3.7, "Knowledge" means the actual knowledge, without any
---
imputation thereof, of Steven Pagliuca, Adam Kirsch or John Maki.
3.8 Noncontravention. The execution, delivery and performance of
----------------
this Agreement and all agreements, documents, and instruments
contemplated thereby by Purchaser or the Purchaser Affiliates,
and the consummation by any of them of the transactions
contemplated hereby and thereby, will not:
(a) Require the consent, waiver, approval, license or
authorization of, or any filing by Purchaser or the Purchaser
Affiliates with, any person, entity or public authority, except for:
(i) approval pursuant to, or the termination or expiration of the
applicable waiting period (and any extension thereof) under, the Hart-
Scott-Rodino Act; and (11) the government approvals listed in
Schedule 3.6; or
------------
(b) Violate, or result in a breach of or the termination or
acceleration of, any obligation under, or constitute a default under,
any provision of any charter or bylaw, or any indenture, mortgage,
lien, lease, agreement, contract. instrument, law, regulation or
ordinance, or any administrative, judicial or arbitral order,
judgment, decree or award, to which Purchaser or any of such Purchaser
Affiliates is a party or is subject.
3.9 Disclosure. Neither this Article 3 nor any certificate delivered
---------- ---------
by Purchaser or the Purchaser Affiliates to Seller or the Seller
Affiliates contains or will contain any untrue statement of a
material fact or omits a material fact necessary to make the
statements contained herein or therein, in light of the
circumstances in which they were made, not misleading.
3.10 Financial Information. Schedule 3.10 attached hereto sets forth
--------------------- -------------
the summary income statement of Wesley-Jessen Corporation and
its subsidiaries for the six month period ended December 31,
1995. The aforementioned summary income statement presents
fairly and accurately, in all material respects, the results of
operations for Wesley-Jessen Corporation and its subsidiaries
for the six-month period ended December 31, 1995, in accordance
with United States GAAP, exclusive of the effects of purchase
accounting adjustments and subject to the lack of footnotes, and
is complete and correct in all material respects. Schedule 3.10
-------------
also contains certain pro-forma, forecasted and estimated (for
the six-month period ended June 28, 1995, prior to WJ's
acquisition of its worldwide contact lens business) financial
information. Purchaser
-32-
<PAGE>
makes no representations or warranties regarding any such pro-
forma, forecasted or estimated financial information or any
expectancy as to future financial performance.
ARTICLE 4
COVENANTS OF SELLER
Seller hereby covenants and agrees that from the date of this
Agreement until the Closing Date, unless another time period is specified:
4.1 Access to Information. Purchaser has examined the books,
---------------------
records, and physical property of the Acquired Subsidiaries and
PD relating to the Contact Lens Products Business and the
Acquired Assets and the Acquired Stock and examined such other
matters relating to the Contact Lens Products Business and the
Acquired Assets and the Acquired Stock as Seller and the
Purchaser may have deemed appropriate. Purchaser and its counsel,
accountants, other representatives and lenders have had, and will
continue to have, reasonable access during normal business hours
to all properties, books, accounts, records, contracts,
documents, key senior management personnel, independent
accountants and legal counsel of Acquired Subsidiaries and, with
respect to the Contact Lens Products Business, of PD, or the
Acquired Assets or the Acquired Stock so that Purchaser ,.nay
have full opportunity to make such investigation as they shall
desire to make of the Contact Lens Products Business and the
Acquired Assets and the Acquired Stock. Purchaser and the
Purchaser Affiliates acknowledge that they have not relied on any
representations or warranties of any kind made by the Seller
relating to the Acquired Assets that are not specifically set
forth in this Agreement. Seller or the Seller Affiliates shall
furnish or cause to be furnished to Purchaser and its
representatives all data and information concerning the Contact
Lens Products Business and the Acquired Assets and the Acquired
Stock that may reasonably be requested by Purchaser.
4.2 Capital Expenditures. Without the prior written consent of WJ,
--------------------
Seller will not, and will cause the Acquired Subsidiaries and PD
(exclusively with respect to the Contact Lens Products Business)
not to, incur or commit to incur any Material capital
expenditures; provided that Seller shall not be obligated to
cause the Acquired Subsidiaries or PD to reduce or eliminate any
capital expenditures which had been authorized by Pilkington or
PBH as of the date hereof; provided further that nothing in this
Section 4.2 shall reduce or otherwise eliminate Seller's
-----------
obligations with respect to the Purchase Price adjustments
described in Section 1.7 of this Agreement.
-----------
4.3 Conduct of Contact Lens Products Business. Except as
-----------------------------------------
specifically contemplated in this Agreement, from March 31, 1996
to the Closing Date, the Contact Lens Products Business has been
and will be operated only in the ordinary course of business,
consistent with past practice, and, in particular, Seller, the
Seller Affiliates, the
-33-
<PAGE>
Acquired Subsidiaries, and PD, without the prior written consent
of Purchaser, have not and will not:
(a) Cancel or permit to lapse or terminate any insurance
relating to the Acquired Subsidiaries or, with respect to PD, relating to
the Contact Lens Products Business or the Acquired Assets, unless renewed
or replaced by like coverage;
(b) Be in material default under any Contract;
(c) Violate or fail to comply in any material respect with any
laws, statutes, regulations, rules, judgments, orders, decrees or other
restrictions applicable to the Acquired Subsidiaries or, with respect to
PD, relating to the Contact Lens Products Business or the Acquired Assets
or the Products;
(d) Grant any increase in salaries payable, or to become payable
by it, to any Employee of the Contact Lens Products Business, except in the
ordinary course of business;
(e) Increase benefits payable to any Employee under any bonus or
pension plan or other contract or commitment, except in the ordinary course
of business;
(f) Enter into any contract, commitment, or other transaction
relating to the Acquired Subsidiaries or, with respect to PD, relating to
the Contact Lens Products Business or the Acquired Assets, not in the
ordinary course of business;
(g) Sell or dispose of any assets relating to the Contact Lens
Products Business, except in the ordinary course of business;
(h) Waive or compromise any right or claim relating to the
Acquired Subsidiaries or, with respect to PD, relating to the Contact Lens
Products Business, except in the ordinary course of business;
(i) Modify, amend, cancel, or terminate any of its Contracts,
except in the ordinary course of business;
(j) Except as disclosed on Schedule 2.8 hereto, take any action
which, or omit to take any action the omission of which, would require
disclosure under Section 2.8 hereof; or
(k) Agree to do any of the actions described in the preceding
clauses (a) through (j).
4.4 Exclusivity. Until the consummation of the transactions
-----------
contemplated hereby or termination of this Agreement in accordance with the
terms hereof, Seller agrees that neither it nor any of its representatives,
directors, officers or affiliates nor any of their
34
<PAGE>
respective representatives, directors, officers or affiliates
will (a) discuss or pursue a possible sale or other disposition
of the Contact Lens Products Business, any capital stock or
substantial portion of the assets of the Contact Lens Products
Business or any interest therein with any other party or provide
any information to any other party in connection therewith or (b)
disclose to any other party the contents of this Agreement. Each
Seller represents and warrants that it has terminated all
discussions with third parties regarding a possible sale or other
disposition of the Contact Lens Products Business, any capital
stock or substantial portion of the assets of the Contact Lens
Products Business or any interest therein.
4.5 Books and Records. Seller will make available to Purchaser, at
-----------------
Purchaser's request and expense, from time to time, all books and
records of the Acquired Subsidiaries and, with respect to PD,
relating to the Contact Lens Products Business which are
reasonably necessary with respect to Purchaser's or the Purchaser
Affiliates' ongoing operations for inspection or copying by
Purchaser or the Purchaser Affiliates at any reasonable time for
a seven (7) year period after the Closing Date.
4.6 Satisfaction of Certain Obligations. Seller will pay, satisfy
-----------------------------------
and discharge or cause the Seller Affiliates to pay, satisfy and
discharge, all of the Seller's, the Seller Affiliates', the
Acquired Subsidiaries', and PD's liabilities and obligations
under the Stay Agreements in accordance with their terms, (ii)
except for European Redundant Employees which are dealt with
under (iv) below, arising under or pursuant to any separation
agreement entered into on or prior to the Closing Date with
respect to any current or former employee of the Acquired
Subsidiaries or PD, (iii) except for European Redundant Employees
which are dealt with under (iv) below, arising under or pursuant
to any severance policy or arrangement with respect to any
employee terminations effected on or prior to the Closing or
initiated on or prior to the Closing to the extent completed in
accordance with the terms thereof and (iv) arising out of or
related to the termination of any of the European Redundant
Employees, whether on, prior to, or after the Closing Date,
provided that in no event shall Seller be responsible under this
subclause (iv) for liabilities, costs or obligations relating to
or arising from its European Restructuring Activities, including
with respect to the termination of the European Redundant
Employees, in excess of $7,319,000.
4.7 Compensation of Terminated Employees. Seller shall be
------------------------------------
responsible to pay or cause the Seller Affiliates to pay the
following with respect to up to ten (10) of the Employees to be
selected by WJ (including selection of such Employee's scheduled
termination date to cease providing services, which shall be no
later than three months from the Closing Date) and listed on
Schedule 4.7 hereto no later than ten days prior to the Closing
------------
Date, who will be given notice of termination of employment by
Seller or the Seller Affiliates no later than the Closing Date
(the "Terminated Employees"): (a) all compensation and benefits
to which each of the Terminated Employees is entitled as a result
of service on or prior to the Closing
35
<PAGE>
Date; and (b) all compensation, severance, and benefit payments
to which each of the Terminated Employees is entitled on account
of their termination, including, without limitation, any such
amounts accrued or payable with respect to any notice period
during which the Terminated Employee is classified as an employee
but is not actively at work with the Acquired Subsidiaries, PD,
or WJ GmbH, as the case may be. Purchaser shall be responsible
for the compensation and benefits (other than as provided in the
preceding sentence) to which each of the Terminated Employees is
entitled for the period commencing with the Closing Date and
ending on the later of (i) the date the Terminated Employee
ceases providing services to the Acquired Subsidiaries, PD, or WJ
GmbH, as the case may be, and (ii) the date on which such
Terminated Employee is scheduled to cease providing services as
specified in Schedule 4.7.
------------
4.8 Closing. Seller shall use its reasonable best efforts to cause
-------
the conditions specified in Article 7 hereof to be satisfied at
---------
or prior to the Closing Date hereof.
4.9 Financial Information. Seller shall furnish or shall cause
---------------------
Seller's independent accountants to furnish to WJ, at Seller's
cost, audited financial statements for the Contact Lens Products
Business for the fiscal years ended March 31, 1996 and 1995
prepared in accordance with United States GAAP and in a form
meeting the requirements of Regulation S-X of the Securities Act
of 1933, as amended (and the consent of Seller's independent
accountants to the use of their reports thereon). Seller shall
provide (or cause its independent accountants to provide), at
Seller's cost, such audited financial statements for the Contact
Lens Products Business for the fiscal year ended March 31, 1996
on or prior to July 31, 1996; provided that Seller shall use
reasonable best efforts to promptly cause the delivery of such
audited financial statements as soon as practicable after the
execution of this Agreement. Seller shall provide (or cause its
independent accountants to provide) such audited financial
statements for the fiscal year ended March 31, 1995 on or prior
to July 31, 1996; provided that Seller shall use reasonable best
efforts to promptly cause the delivery of such audited financial
statements as soon as practicable after the execution of this
Agreement. Seller shall cooperate with WJ and shall use
reasonable efforts to cause Seller's independent accountants to
furnish to WJ, at WJ's cost, unaudited interim financial
statements for the Contact Lens Products Business for the three
month periods ended June 30, 1996 and 1995 prepared in accordance
with United States GAAP and in a form meeting the requirements of
Regulation S-X of the Securities Act of 1933, as amended, on or
prior to December 31, 1996; provided, that Seller shall use
reasonable efforts to cause the delivery of such unaudited
financial statements as soon as practicable after the execution
of the Agreement. The parties hereto acknowledge and agree that
time is of the essence in the performance of the provisions of
this Section 4.9.
------------
36
<PAGE>
4.10 Intercompany Accounts. Effective as of the Closing, all
---------------------
intercompany receivables, payables, loans and investments then
existing between Seller or any affiliate thereof that is not an
Acquired Subsidiary, on the one hand, and any Acquired
Subsidiary, on the other hand, shall be settled, canceled or
otherwise terminated without payment. Seller shall indemnify and
hold harmless Purchaser and any affiliates thereof, and their
respective directors, shareholders, partners, officers,
employees, agents, consultants, representatives, successors,
transferees and assigns, from and against any and all Taxes
actually incurred or payable thereby solely as a result of the
consummation of any intercompany transfer in accordance with
this Section 4.10. Notwithstanding anything to the contrary in
------------
this Section 4. 10, Purchaser agrees that the intercompany loan
outstanding in an amount up to (Pounds)3.5 million from
Pilkington Finance Limited to PBH Ltd. shall remain outstanding.
4.11 Insurance. To the extent that (i) there are third-party
---------
insurance policies maintained by the Seller or its affiliates
("Seller's Policies") covering any Actual Loss (as defined in
Section 10.2 or 10.3 hereof) relating to the Acquired
Subsidiaries or the assets, liabilities, products, operations or
employees of the Contact Lens Products Business (all such Actual
Losses are referred to in this Section 4.11 as the "Insured
Liabilities") and relating to or arising out of occurrences
prior to the Closing, and (ii) Seller's Policies by their terms
continue after Closing to permit claims with respect to such
Insured Liabilities ("Insured Claims") to be made relating to
occurrences prior to the Closing, each of the parties hereto
agrees to cooperate, and to cause their respective affiliates to
cooperate, with the other party and its affiliates and use
reasonable efforts in submitting Insured Claims on behalf of the
party ultimately bearing any such Actual Loss with respect to
such Insured Liabilities.
4.12 Title to Property. On or prior to the Closing Date or as soon
-----------------
as practicable thereafter, (i) Seller shall deliver to
Purchaser, at Seller's cost and expense, in a form reasonably
acceptable to Purchaser, copies of all assignments and other
instruments of transfer and conveyance as Purchaser may
reasonably request effective to vest in WJ GmbH or an Acquired
Subsidiary all right, title, and interest in and to all
Intellectual Property, all tangible personal property used
exclusively in the Contact Lens Products Business aid all Real
Property (excluding Intellectual Property licensed from a third
party); and (ii) title to all such Intellectual Property and all
such tangible personal property and all Owned Property shall
have been recorded or updated, at Seller's cost and expense,
with the appropriate government office or entity, including, but
not limited to, the United States Patent and Trademark Office
and the United States Copyright Office, or all documents
necessary to update such title shall have been recorded with the
appropriate government office or entity.
4.13 Commuter Service Deliveries. Seller shall deliver to Purchaser,
---------------------------
at Seller's cost and expense, in a form reasonably acceptable to
Purchaser, on or prior to the Closing Date, (i) agreements
between SAP (UK) Limited and/or its affiliates and such of the
37
<PAGE>
Acquired Subsidiaries and WJ GmbH as is necessary to ensure that
the installation and usage of the SAP systems currently licensed
under an agreement between SAP (UK) Limited and Pilkington dated
January 4, 1995 can proceed for and with respect to the Contact
Lens Products Business as intended as at the date of this
Agreement, (ii) agreements terminating any contract or agreement
between any Acquired Subsidiary and Seller or any of its
affiliates that is not an Acquired Subsidiary, with respect to
the SAP systems, (iii) evidence that SAP (UK) Limited and/or its
affiliates have consented to the use, by Electronic Data Systems
Limited ("EDS") (for the purposes of, and with respect to, any
services to be provided by EDS pursuant to an agreement between
EDS and PBH last executed on September 4, 1995 (the "EDS
Agreement")), of systems licensed by SAP (UK) Limited and/or its
affiliates to any one or more of the Acquired Subsidiaries or WJ
GmbH under agreements obtained pursuant to clause (i) above, and
(iv) evidence that EDS has agreed to provide services to all
sites listed in Annex A to Service Agreement 1.2 to the EDS
Agreement, notwithstanding that sites listed therein are or
include sites of Acquired Subsidiaries other than PBH.
4.14 Inactive Subsidiaries. Seller shall, on or prior to the Closing
---------------------
Date, cause the Acquired Subsidiaries to contribute or
distribute, without payment, to Seller or any of Seller's
affiliates other than the Acquired Subsidiaries, all of the
issued and outstanding capital stock of each of those entities
identified on Schedule 2.4 attached hereto. Seller shall
------------
indemnify and hold harmless Purchaser and its affiliates, and
their respective directors, shareholders, partners, officers,
employees, agents, consultants, representatives, successors,
transferees and assigns, from and against any and all Taxes
actually incurred or payable thereby solely as a result of the
consummation of any transaction in accordance with this Section
-------
4.14.
----
4.15 Maintenance of Inventory. Seller agrees that if the number of
------------------------
stock keeping units of inventory for the Contact Lens Products
Business on the Closing Date is less than ninety-five percent
(95%) of the number of stock keeping units of inventory for the
Contact Lens Products Business as of March 31, 1996 (the amount
by which the number of stock keeping units of inventory on the
Closing Date is less than ninety-five percent (95%) of the
number of stock keeping units of inventory as of March 31, 1996
being herein referred to as the "Inventory Shortfall"), then
Seller will pay Purchaser an amount equal to two dollars per
stock keeping unit for each stock keeping unit of the Inventory
Shortfall.
4.16 Contribution of PBH International Stock. At Purchaser's request
---------------------------------------
in writing, Seller shall, on or prior to the Closing Date, cause
Pilkington Holding, Inc. to contribute, without payment, to PBH,
all of the issued and outstanding capital stock of PBH
International; provided, however, that Purchaser agrees to
indemnify Seller and its affiliates for any Tax liabilities
resulting from any such contribution.
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<PAGE>
ARTICLE 5
COVENANTS OF PURCHASER
Purchaser hereby covenants and agrees that from the date of this
Agreement until the Closing Date unless another time period is specified:
5.1 Closing. Purchaser will use its reasonable best efforts to cause
-------
the conditions specified in Article 8 hereof to be satisfied at
---------
or as soon as practicable prior to the Closing Date.
5.2 Pilkington Name. From and after the Closing, as soon as
---------------
reasonably practicable, but no later than sixty (60) days after
the Closing, Purchaser shall amend the Articles of Incorporation
or Certificate or Incorporation of any Acquired Subsidiary to
remove the name "Pilkington" therefrom, and shall remove, or
shall cause to be removed, from the exterior of the Acquired
Subsidiaries' premises the "Pilkington" name and Pilkington logo.
After Closing, Purchaser and the Purchaser Affiliates shall have
quantities of inventory, preprinted stationery, packaging
material and other supplies which bear the "Pilkington" name and
logo. With respect to (i) such preprinted stationery, packaging
material and other supplies, for a period of up to six months
from the Closing Date, and (ii) inventory, for such period of
time as such inventory is sold or otherwise consumed, Seller
hereby grants to Purchaser and the Purchaser Affiliates a paidup
license to use the "Pilkington" name or logo and any trademarks,
trade names or trade dress associated therewith; provided, that
such license shall cease immediately upon the disparaging use of
the name "Pilkington" and in any event upon the expiration of
such period. Purchaser and the Purchaser Affiliates shall not be
entitled to use the "Pilkington" name and/or logo except as
provided in this Section 5.2.
5.3 FTC Matters. WJ shall use its reasonable best efforts to cause
-----------
the Federal Trade Commission (the "FTC") to terminate the waiting
period under the Hart-Scott-Rodino Antitrust Improvement Act of
1976, as amended (the "HSR Act"), by entering into a patent
license agreement with another current manufacturer of soft
contact lenses (respectively, the "Replacement License" and the
"Replacement Licensee"), with the following terms: (i) the
patents licensed under the Replacement License shall include all
of those United States patents owned by WJ and currently licensed
under that certain agreement dated and effective as of August 1,
1994 for use by the Seller's Contact Lens Products Business in
connection with the manufacture and sale of opaque contact lenses
(the "WJ-PBH License"); (ii) the scope of licensed product in the
Replacement License shall include conventional lenses made from
Replacement Licensee's materials; and (iii) other commercially
reasonable terms. Notwithstanding any provision in this Agreement
to the contrary, WJ shall not be required to offer terms more
favorable than the commercial terms (i.e., those terms
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<PAGE>
not related to the termination of litigation) contained in the
WJ-PBH License. Seller and Purchaser shall use their reasonable
best efforts to satisfy the FTC that the Replacement License is
sufficient to address any FTC antitrust concerns and that the
waiting period under the HSR Act should be terminated promptly.
Seller may terminate this Agreement and abandon the transactions
contemplated herein at any time after July 12, 1996 by delivering
written notice to WJ, unless WJ has delivered the executed
Replacement License to Seller prior to Seller's termination of
this Agreement pursuant to this sentence.
ARTICLE 6
MUTUAL COVENANTS OF PURCHASER AND SELLER
6.1 Confidentiality. Except as required by law or regulation, each
---------------
of the Purchaser and the Seller and their officers, directors,
and other representatives, including counsel, accountants,
lenders and environmental consultants, will, and will cause the
Purchaser Affiliates or the Seller Affiliates, as the case may
be, to, hold in strict confidence, and will not, and will cause
the Purchaser Affiliates or the Seller Affiliates, as the case
may be, not to, divulge, communicate, use to the detriment of the
other or for the benefit of any other person or persons, or
misuse in any way, any financial information or other data
obtained in connection with this Agreement, including, without
limitation, any confidential information or trade secrets, this
Agreement and the existence of this Agreement and the
transactions contemplated hereby, personnel information,
processes, systems, improvements, discoveries, developments,
designs, inventions, techniques, new products, pricing policies,
projections, forecasts, strategies, budgets, know-how, customer
lists, formulas, or other data relating to the business of the
parties or its customers ("Evaluation Material"). If the
transactions contemplated by this Agreement are not consummated,
(i) each of the Purchaser and the Seller will return, or cause
the respective Purchaser Affiliates or Seller Affiliates, as the
case may be, to return, to the other all such Evaluation Material
and all copies made and information as the other party may
reasonably request, including, without limitation, work sheets,
test reports, manuals, lists, memoranda, and other documents
prepared by or made available to the other party in connection
with this transaction, and (ii) each of the Purchaser and the
Seller will not, nor will it permit any of its employees, agents
or representatives to retain any copies or use or disclose to any
third parties (except to the extent publicly available,
obtainable from independent sources (not in violation of any
confidentiality agreement) or as required by law or regulation)
any Evaluation Material.
6.2 Books and Records. Seller and Purchaser hereby covenant and
-----------------
agree that as soon as is reasonably practicable after the Closing
Date, Seller's representatives and Purchaser's representatives
will review the books and records of Seller relating to the
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<PAGE>
Contact Lens Products Business. Any books and records relating to
the Contact Lens Products Business not desired by Purchaser and
desired by Seller will be given to Seller for removal at Seller's
expense. Any books and records relating to the Contact Lens
Products Business desired by both parties will be given to
Purchaser, but shall be made available to Seller for as long as
Seller reasonably deems necessary (not to exceed seven (7) years
from the Closing Date). Each of the parties will keep any such
books or records for inspection or copying by the other party (at
the requesting party's expense) at any reasonable time for a
period of seven (7) years after the Closing Date.
6.3 Cooperation. With respect to all matters other than Taxes and
-----------
any claims for indemnification pursuant to Article 10 below, in
the event and for so long as any of Purchaser or the Purchaser
Affiliates or Seller or the Seller Affiliates, on the one hand,
actively is contesting or defending against any charge,
complaint, action, suit, proceeding, audit, hearing,
investigation, claim, or demand in connection with the Acquired
Subsidiaries or the Contact Lens Products Business or with any
transaction contemplated under this Agreement, or any fact,
situation, circumstance, status, condition, activity, practice,
plan, occurrence, event, incident, action, failure to act, or
transaction on or prior to the Closing Date involving the
Acquired Subsidiaries or the Contact Lens Products Business as
carried on by Seller, then Seller or the Seller Affiliates or
Purchaser or the Purchaser Affiliates, as the case may be, will
cooperate with the contesting or defending party and its counsel
in the contest or defense, make available its personnel, and
provide such testimony and access to its books and records as
shall be reasonably necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or
defending party.
6.4 Public Announcements. Except as required by law or regulation,
--------------------
no press releases or other public announcements relating to the
transactions described herein will be issued or otherwise
released by any party without the prior written consent of the
other parties. If Seller or Purchaser or any of the respective
Seller Affiliates or Purchaser Affiliates is required by law or
regulation to make any public announcements relating to the
transactions contemplated herein, such party will submit its
proposed announcement in advance to the other party and will give
it a reasonable opportunity in the circumstances to comment
thereon in advance of release.
6.5 Consents. Each of the Seller and Purchaser will use its
--------
reasonable best efforts to obtain as promptly as practicable such
consents, approvals, or authorizations of third parties to
agreements that would otherwise be violated by any provisions
hereof and all consents, approvals, or authorizations as are
required to be obtained under any foreign, federal, state, or
local law or regulation and to make such filings with all such
third parties and governmental authorities necessary to
consummate the transactions contemplated by this Agreement.
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<PAGE>
6.6 Reasonable Best Efforts. Seller and Purchaser each agrees to use
-----------------------
its reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done as promptly as
practicable, all things necessary, proper, or advisable under
applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement. If at any time
after the Closing Date any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper
officers and directors of each party to this Agreement shall take
all such necessary action.
6.7 Certain Notifications. At all times from the date hereof and
---------------------
prior to the Closing Date, each party shall promptly notify the
other party in writing of the occurrence of any event known to
such party which will or is likely to result in the failure to
satisfy any of the conditions specified in Articles 7 and 8
---------- -
hereof.
6.8 Termination of Employees. Except as otherwise provided in this
------------------------
Agreement, from and after the Closing Date, Purchaser will be
responsible for all severance and other termination payments
which arise on account of any termination of an employee of the
Contact Lens Products Business initiated after the Closing Date.
Purchaser shall fully indemnify Seller and its affiliates with
respect to all such payments.
6.9 Tax Matters.
-----------
(a) Taxable Periods Ending on or Before the Closing Date.
----------------------------------------------------
Purchaser shall prepare, or cause to be prepared and file or cause to
be filed, all Tax Returns (as defined below) for the Acquired
Subsidiaries for all taxable periods ending on or prior to the Closing
Date which are filed after the Closing Date (other than income and
franchise Tax Returns with respect to periods for which the operations
of such Acquired Subsidiaries are included in the consolidated,
unitary or combined income Tax Returns of Seller or the Seller
Affiliates). Purchaser shall permit Seller to review and comment on
each such Tax Return described in the preceding sentence prior to
filing. Seller shall reimburse Purchaser for Taxes of the Acquired
Subsidiaries with respect to taxable periods ending on or before the
Closing Date within fifteen (15) days of payment by Purchaser, the
Purchaser Affiliates, or the Acquired Subsidiaries of such Taxes to
the extent such Taxes have not been paid on or before the Closing
Date. Seller shall be entitled to all Tax refunds for the Acquired
Subsidiaries for all taxable periods ending on or prior to the Closing
Date, and Purchaser, Purchaser Affiliates, and the Acquired
Subsidiaries shall, at Seller's request, file for such refunds and
fully cooperate to obtain the same. Purchaser shall pay Seller any
such refund amounts within fifteen (15) days of Purchaser's, Purchaser
Affiliates', or Acquired Subsidiaries' receipt of the same.
(b) Taxable Periods Beginning Before and Ending, After the
------------------------------------------------------
Closing Date. Purchaser shall prepare and file, or cause to be
------------
prepared and filed, any Tax Returns of the Acquired Subsidiaries for
taxable periods which begin before the closing Date and end after
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<PAGE>
the Closing Date. Seller shall pay to Purchaser or the Purchaser
Affiliates within fifteen (15) days of the date on which Taxes are
paid with respect to such periods an amount equal to the portion of
such Taxes which relates to the portion of such taxable period ending
on the Closing Date to the extent such Taxes have not been paid on or
before the Closing Date. For purposes of this Section, in the case of
any Taxes that are imposed on a periodic basis and are payable for a
taxable period that includes (but does not end on) the Closing Date,
the portion of such Tax which relates to the portion of such Taxable
period ending on the Closing Date shall (x) in the case of any Taxes
other than Taxes based upon or related to income, be deemed to be the
amount of such Tax for the entire taxable period multiplied by a
fraction the numerator of which is the number of days from the
beginning of the taxable period and ending on the Closing Date and the
denominator of which is the number of days in the entire taxable
period, and (y) in the case of any Tax based upon or related to income
be deemed equal to the amount which would be payable if the relevant
taxable period ended on the Closing Date. Any Tax refunds for taxable
periods which begin before the Closing Date and end after the Closing
Date shall be apportioned as described in this subsection (b).
Purchaser, Purchaser Affiliates, and the Acquired Subsidiaries and
Seller and Seller Affiliates shall file for such refunds and fully
cooperate to obtain the same. Purchaser shall pay Seller any refund
amount due Seller under this subsection (b) within fifteen (15) days
of Purchaser's, Purchaser Affiliates', or Acquired Subsidiaries'
receipt of the same.
(c) Additional Tax Indemnification. In addition to the Taxes
------------------------------
allocated to Seller under Section 6.9(a) and 6.9(b) above, Seller
-------------- ------
shall be liable for, and shall indemnify and hold Purchaser, the
Purchaser Affiliates, and the Acquired Subsidiaries harmless against,
without duplication, (i) all liability (whether as a result of
Treasury Regulation (S)1.1502-6, or any similar provision of state,
local, or foreign law, as a transferee, by contract, or otherwise) for
Taxes of any Person (other than the Acquired Subsidiaries) based on an
affiliation, contractual relationship or other relationship existing
at any time prior to the Closing, (ii) all Taxes due by reason of the
elections to be made under Section 338(g) or 338(h)(10) of the Code
(or any other election under any similar state or local statute) with
respect to the purchase and sale of the Acquired Stock contemplated by
this Agreement, and (iii) all Taxes arising in connection with the
conversion or initiation of the conversion (only to the extent so
initiated) of the operations of any of the Acquired Subsidiaries to
commissionaires before the Closing, including any Taxes on a deemed
disposition of goodwill as a result of such conversion.
(d) Cooperation on Tax Matters. Purchaser, the Purchaser
--------------------------
Affiliates, the Acquired Subsidiaries and Seller and the Seller
Affiliates shall cooperate fully, as and to the extent reasonably
requested by the other party, in connection with the filing of Tax
Returns pursuant to this Section, or any amended return, claim for
refund, determining a liability for Taxes or a right to refund of
Taxes, or any audit, litigation or other proceeding with respect to
Taxes. Such cooperation shall include the retention and (upon the
other party's request) the provision of records and information which
are reasonably relevant to any such return, analysis, audit,
litigation or other proceeding and making employees available on a
mutually
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<PAGE>
convenient basis to provide additional information and explanation of
any material provided hereunder. The Acquired Subsidiaries and Seller
and the Seller Affiliates agree (A) to retain all books and records
with respect to Tax matters pertinent to the Acquired Subsidiaries
relating to any taxable period beginning before the Closing Date until
the expiration of the statute of limitations (and, to the extent
notified by Purchaser or Seller, any extensions thereof) of the
respective taxable periods, and to abide by all record retention
agreements entered into with any taxing authority, and (B) to give the
other party reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if the other
party so requests, the Acquired Subsidiaries or Seller and the Seller
Affiliates, as the case may be, shall allow the other party to take
possession of such books and records.
(e) Section 338(h)(10) Election. Seller agrees, if so requested
---------------------------
by Purchaser, to join Purchaser in making an election under Section
338(h)(10) of the Code with respect to the sale and purchase of the
shares of capital stock of PBH and to join Purchaser in making any
analogous elections under applicable state law (including elections
corresponding to Section 338(g) of the Code) with respect to such sale
and purchase. Seller agrees to execute Form 8023-A and such other
documents or forms as may be required to make the foregoing elections.
Purchaser and Seller agree to allocate the Modified Aggregate Deemed
Sale Price (as defined in the Treasury Regulations) as provided on
Schedule 1.9, and that such allocation shall be reported by both
------------
Purchaser and Seller to all applicable taxing authorities'.
(f) Transfer Taxes. Seller and Purchaser each agree to pay,
--------------
or cause the respective Seller Affiliates or Purchaser Affiliates to
pay, fifty percent (50%) of the transfer, excise, or similar taxes
arising from or relating to the transactions contemplated by this
Agreement.
(g) For purposes of this Agreement, "Tax Return" shall mean any
return, report, information return, declaration, claim for refund or
other document (including any related or supporting information) filed
or required to be filed with any taxing authority with respect to
Taxes.
6.10 Transition Countries. If by the Closing Date, Purchaser and
--------------------
Seller or the respective Purchaser Affiliates or Seller
Affiliates have not received regulatory clearance in one or more
countries (excluding the United States and the United Kingdom)
to close the transactions contemplated hereby (excluding the
United States and the United Kingdom) (a "Transition Country"),
it is agreed that Seller shall, directly or through the Seller
Affiliates, the Acquired Subsidiaries (to the extent not
transferred), or PD, on and after the Closing Date, and during
the period from the Closing Date until receipt of regulatory
clearance in the country (the "Transition Period"), carry on
that part of the Contact Lens Products Business as agent and
trustee and for the account of Purchaser and the Purchaser
Affiliates, if permitted by applicable law, in accordance with
the following provisions:
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<PAGE>
(a) Seller shall within thirty (30) days after the end of each
calendar month of the Transition Period, and also within thirty (30) days after
the end of the Transition Period, prepare, or cause to be prepared, an account
for the Contact Lens Products Business in each Transition Country, showing for
each such calendar month or other period:
(i) All receipts received by Seller, PD, the Seller Affiliates,
and the Acquired Subsidiaries (to the extent not transferred); and
(ii) All payments made and expenses incurred or recognized by
Seller, PD, the Seller Affiliates, and the Acquired Subsidiaries (to
the extent not transferred) directly relating to the Contact Lens
Products Business (but not including any payments or expenses
allocated to the Contact Lens Products Business).
The account shall show the net difference between (i) and (ii), and shall be
accompanied by payment of the difference to Purchaser if (i) is greater than
(ii), or an invoice to Purchaser for the difference if (ii) is greater than (i),
which invoice Purchaser shall pay within ten (10) days after receipt.
(b) Any comments or objections which Purchaser may have with respect
to the accounts rendered for that Transition Country under Section 6.10(a) above
---------------
shall be discussed promptly between Purchaser and Seller. If such comments or
objections result in the matter under discussion being resolved, then any
appropriate amendment shall be made to such account and Purchaser and Seller
shall account to each other accordingly. If they do not result in such
resolution, then the matter in dispute shall be dealt with in the manner
outlined in Section 10.5 below.
------------
(c) If any claim which is covered by insurance of Seller or any of its
affiliates shall arise during the Transition Period in respect of any of the
Acquired Subsidiaries' Assets or Acquired Assets relating to a part of the
Contact Lens Products Business carried on in a Transition Country, Seller shall
promptly submit, or cause to be submitted, all relevant documents to the
insurers to substantiate such claim in trust for Purchaser and turn over the
proceeds to Purchaser. Seller shall promptly inform Purchaser of the
circumstances giving rise to such insurance claim.
(d) Purchaser shall have sole liability and responsibility for and in
respect of all employees, if any, in each Transition Country (the "Transition
Employees") on and after the Closing, and Purchaser shall indemnify or, cause
the Purchaser Affiliates to indemnify, Seller, the Seller Affiliates, and keep
them indemnified in respect thereof. To facilitate an orderly transition of the
relevant part of the Contact Lens Products Business in each Transition Country,
during the Transition Period, Seller or the Seller Affiliates shall continue to
employ the Transition Employees and, in consideration thereof except as
otherwise provided in this Agreement, Purchaser or the Purchaser Affiliates
shall fully reimburse Seller and the Seller Affiliates the cost of the salary,
benefits, and other payments payable to or in
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<PAGE>
respect of the relevant Transition Employees incurred with respect to the
Transition Period. All such sums so payable shall be regarded as payment of
expenses in respect of the Contact Lens Products Business within the meaning of
Section 6.10(a)(ii) above, and shall be reflected in the account(s) rendered for
- -------------------
the relevant Transition Country. Except as otherwise provided in this
Agreement, no liabilities shall attach to Seller or the Seller Affiliates in
respect of any of such Transition Employees, who shall be the sole
responsibility of Purchaser and the Purchaser Affiliates, and over whom
Purchaser and the Purchaser Affiliates shall have full management and
supervisory responsibility from and after the Closing; provided, however, that
nothing herein shall remove any liability or obligation with respect to any
Transition Employee which arose or existed on or prior to the Transition Period
and Seller shall fully indemnify Purchaser and its affiliates and the Acquired
Subsidiaries with respect to all such liabilities and obligations.
6.11 Non-Competition; Non-Solicitation. As a condition precedent to Purchaser's
---------------------------------
obligation to enter into and perform its obligations under this Agreement,
Seller, on behalf of itself and its affiliates, agrees that:
(a) For a period of five (5) years after the Closing Date (the "Non-
---
Competition Period"), except for ownership of the Note and except with respect
- ------------------
to technology developed by Seller or any of its affiliates in conjunction with
other lines of business, neither Seller nor its affiliates shall, directly or
indirectly, either for itself or for any other person, "participate" anywhere in
the world in the Contact Lens Products Business or any extension thereof. For
purposes of this Agreement, the term "participate" includes any direct or
indirect interest in any enterprise, whether as an officer, director, employee,
partner, sole proprietor, agent, representative, independent contractor,
consultant, franchisor, franchisee, creditor, owner or otherwise; provided, that
the term "participate" shall not include ownership of less than 2% of the stock
of a publicly-held corporation whose stock is traded on a national securities
exchange or in the over-the-counter market. Notwithstanding the above, nothing
herein shall prohibit, prevent, or restrict any of Seller or its affiliates from
acquiring any company or business the acquisition of which would (but for the
provisions of this sentence) be prohibited under the provisions of this Section
-------
6.11(a) (prohibited activities of any such acquired company or business being
- -------
referred to as the "contact lens business activities"), where the turnover of
such contact lens business activities constitutes less than fifty percent (50%)
of the aggregate turnover of the company, business, or group of companies or
businesses acquired (as the case may be) as part of the same transaction or
series of related transactions. In the event that Seller or any of its
affiliates should acquire any such company or business during the Non-
Competition Period pursuant to the immediately preceding sentence, Seller agrees
to dispose or cause such affiliate to dispose of the contact lens business
activities of such company or business within twelve (12) months from the date
of consummation of such transaction and to provide Purchaser with a right of
first offer to purchase such contact lens business activities. Seller will
notify Purchaser in writing of the acquisition of any such contact lens business
activities (the "Purchase Notice") within thirty (30) days after the date of
such acquisition, and if Purchaser gives written notice of its
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<PAGE>
interest in acquiring such contact lens business activities (the "Interest
Notice") within thirty (30) days of the receipt of the Purchase Notice, Seller
agrees to negotiate in good faith with Purchaser for the purchase by Purchaser
of such business. If, after sixty (60) days from the date of Seller's receipt
of the Interest Notice, Seller and Purchaser have been unable to agree on terms
for the purchase by Purchaser of the contact lens business activities, or if,
prior to such date, Purchaser shall have advised Seller that Purchaser has
determined not to further pursue the acquisition of such business, then Seller
may sell such contact lens business activities to any other person or entity on
terms not less favorable to Seller or its affiliates than those offered in
writing by Purchaser during negotiations contemplated herein.
(b) During the Non-Competition Period, Seller will not, and will not
permit its affiliates to, divulge or appropriate for their own use, or for the
use of any third party, any secret or confidential information or knowledge
obtained by Seller or any of its affiliates concerning the Contact Lens Products
Business. This obligation of secrecy shall not apply to information which (i)
is or becomes part of the public domain other than through breach of this
Agreement or through the fault of Seller or any of its affiliates, (ii) is or
becomes available to Seller or its affiliates from an unaffiliated source, which
source has no obligation of secrecy to Purchaser or its affiliates, (iii) is
required to be disclosed by law or government order (but only to the extent so
required), or (iv) is used by Seller or any of its affiliates in any other lines
of business, provided that the exception in this subclause (iv) shall not apply
to information that is divulged by Seller or its affiliates to any third party
specifically for its use in the Business Field (as defined in Section 6.11(f)
---------------
below).
(c) During the two-year period following the Closing Date, neither
Seller nor its affiliates will solicit the employment (in any capacity of, or,
to the extent not otherwise prohibited by law, hire any Employee without the
prior written consent of Purchaser.
(d) If, at the time of enforcement of this Section 6.11, a court holds
------------
that the duration, scope, geographic area or other restrictions stated herein
are unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope, geographic area or other restrictions deemed reasonable
under such circumstances by such court shall be substituted for the stated
duration, scope, geographic area or other restrictions.
(e) Seller, on behalf of itself and its affiliates, recognizes and
affirms that in the event of breach of any of the provisions of this Section
-------
6.11, money damages would be inadequate and Purchaser and its affiliates would
- ----
have no adequate remedy at law. Accordingly, Seller, on behalf of itself and its
affiliates, agrees that Purchaser and its affiliates shall have the right, in
addition to any other rights and remedies existing in their favor, to enforce
their rights and Seller's obligations under this Section 6.11 not only by an
------------
action or actions for damages, but also by an action or actions for specific
performance, injunctive and/or other equitable relief in order to enforce or
prevent any violations (whether anticipatory, continuing or future) of the
provisions of this Section 6.11 (including, without limitation, the extension of
------------
the Non-Competition Period by a period equal to (i) the length
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<PAGE>
of the violation of this Section 6.11 plus (ii) the length of any court
------------
proceedings necessary to stop such violation). In the event of a breach or
violation by Seller of any of the provisions of this Section 6.11, the running
------------
of the Non-Competition Period (but not of Seller's obligations under this
Section 6.11) shall be tolled with respect to Seller during the continuance of
- ------------
any actual breach or violation.
(f) During the two-year period following the Closing Date, Seller will,
and will cause its affiliates to, use reasonable best efforts to notify
Purchaser in writing of any proposed licensing of IP Rights by Seller or any of
its affiliates to any other person or entity engaged in the Business Field, for
use of the same in the Business Field. In such event, Seller will negotiate in
good faith with Purchaser for the non-exclusive licensing of such IP Rights on
terms mutually agreeable to Purchaser and Seller. As used in this Section
-------
6.11(f), "IP Rights" means all invention registrations, patents, patent
- -------
registrations and patent applications and all rights therein provided by law and
all technical information, including without limitation (i) inventions, whether
or not patentable, whether or not reduced to practice, and whether or not yet
made the subject of a pending patent application or applications, (ii) ideas and
conceptions of potentially patentable subject matter, including without
limitation, any patent disclosures, whether or not reduced to practice and
whether or not yet made the subject of a patent application, (iii) trade secrets
and confidential, technical information (including without limitation, ideas,
formulae, compositions, inventions, and conceptions of inventions whether
patentable or unpatentable and whether or not yet reduced to practice), and (iv)
technology, manufacturing and production processes and techniques, research and
development information, drawings, specifications, designs, plans, proposals,
technical data, whether secret or confidential or not. "Business Field" means
the worldwide research, development, manufacture, distribution and sale of
contact lenses.
6.12 Foreign Employee Issues.
-----------------------
(a) Purchaser shall offer (or shall cause one of the Purchaser Affiliates
to offer) to employ each PD Foreign Employee (as defined below). The "PD Foreign
Employees" shall include all individuals who, immediately prior to the Closing
Date, are employees and are actively employed and assigned to the Contact Lens
Products Business at PD as of the Closing Date and such other employees who
Purchaser will be required to offer employment to under applicable German laws.
Each PD Foreign Employee who accepts the offer of employment (without any
rejection thereof as permitted under law) or, in case local law provides for a
transfer of employment, each PD Foreign Employee whose employment is so
transferred, shall be a "Foreign Transferred Employee," Neither Purchaser nor
any affiliate thereof shall have any obligation under this Agreement to provide
employment to any PD Foreign Employee who properly objects to becoming a Foreign
Transferred Employee. If a PD Foreign Employee objects, or refuses to assent, to
the consummation of the transactions contemplated by this Agreement, Purchaser
and its affiliates shall have no liability or obligation to such PE Foreign
Employee and Seller or the Seller Affiliates shall be fully
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<PAGE>
responsible for any liability or obligation with respect to such PD Foreign
Employee. Seller shall indemnify and save harmless Purchaser and its affiliates
from any and all claims, actions, obligation, liabilities, and damages of any
kind, in law or in equity, and including legal fees, arising out of, relating to
or based in any way upon the employment relationship of the PD Foreign Employees
with PD prior to the Closing Date or with Purchaser or its affiliates on and
after the Closing Date, including reimbursement of all compensation and benefit
costs related to such persons, provided that (i) such person received a notice
of termination on or prior to the Closing Date, (ii) PD terminated or attempted
to terminate such person on or prior to the Closing Date but such termination or
attempted termination is invalid for any reason, or (iii) such person is
classified as a PD Foreign Employee by operation of law or otherwise but such
person is not listed on Schedule 6.12(a) or is listed on Schedule 6.12(a) with a
---------------- ----------------
date of termination listed next to his or her name.
(b) Foreign Transferred Employees shall not accrue benefits under any
employee benefit policy, plan, arrangement, program or agreement of Seller (or
the Seller Affiliates) after the Closing Date. Notwithstanding the foregoing,
Seller (or the Seller Affiliates) shall be responsible for all benefits accrued,
claims incurred or obligations arising with respect to the Foreign Transferred
Employees' service with Seller (or the its affiliates) on or prior to the
Closing Date (except as provided in Section 6.12(c) as it pertains to the
---------------
transfer of pension obligations), and Seller shall satisfy, or cause the Seller
Affiliates to satisfy, such responsibility by paying to Purchaser the amount of
any such pre-Closing Date obligations which are assumed by Purchaser (or its
affiliates), by operation of law or by express assumption.
(c) With respect to the non-insured pension plan maintained by PD,
Purchaser (or one of the Purchaser Affiliates) shall assume the pension
obligations accrued as of the Closing Date under the PD pension plan with
respect to the Foreign Transferred Employees of PD. In return, Seller shall
cause an amount of cash to be transferred to Purchaser (or one of the Purchaser
Affiliates) as of the Closing Date in an amount equal to the liabilities for
such pension obligations assumed at Closing determined pursuant to Section 6a of
the German Income Tax Act, regardless of whether this amount was accrued as a
reserve by PD upon the Closing Date. Thereafter, neither Seller nor any of its
affiliates shall have any liability or obligations with respect to such pension
obligations assumed by Purchaser or one of the Purchaser Affiliates and if it is
determined that Seller or any of its affiliates shall have a liability or
obligation with respect to such pension obligations assumed by Purchaser or one
of the Purchaser Affiliates, Purchaser shall indemnify Seller or any of its
affiliates for the amount of such liability or obligation. With respect to the
pension contracts maintained by PD, Purchaser (or one of the Purchaser
Affiliates) shall assume such pension contracts as of the Closing Date with
respect to the Foreign Transferred Employees of PD; provided, that if as of the
Closing Date the premiums payable under such insured pension contracts are in
arrears, Seller will pay to Purchaser (or one of the Purchaser Affiliates) an
amount equal to such shortfall.
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<PAGE>
(d) UK Pension Schemes.
------------------
(i) PBH Ltd. Retirement and Benefit Schemes. Seller agrees to
----------------------------------------
indemnify and keep indemnified the Purchaser, its affiliates, and Required
Subsidiaries against, and to pay to WJ (in WJ's capacity as trustee and agent
for (i) itself, (ii) the administrators of the Pilkington Barnes Hind Ltd.
Retirement and Benefit Scheme ("PBH UK Scheme"), and (iii) any of the Acquired
Subsidiaries) the Funding Shortfall. The Funding Shortfall for this purpose
means the amount, if any, by which the accrued actuarial liabilities of the PBH
UK Scheme as of the Closing Date exceeds the assets of the PBH UK Scheme
calculated in accordance with the Projected Accrued Benefit Method as of the
Closing Date, together with interest at the valuation rate from the Closing Date
to the date of payment. The Funding Shortfall shall be determined in accordance
with the actuarial method and assumptions set out in Schedule 6.12(d)(i).
-------------------
(ii) Pilkington Superannuation Scheme. Purchaser and Seller agree to
--------------------------------
cause the Foreign Agreement conveying the Acquired Stock of PBH Ltd. (the "UK
Purchase Agreement") to provide that employees of the Acquired Subsidiaries who
are members (the "PSS Members") of the Pilkington Superannuation Scheme
("Pilkington Scheme") shall continue to participate in the Pilkington Scheme
until December 31, 1996 (the "post-closing period"). WJ agrees that, during the
post-closing period, it (i) shall not increase the salaries with respect to the
PSS Members in excess of the salary scale projection under the Pilkington
Scheme, (ii) shall pay to Pilkington monthly the amount of contributions due to
the Pilkington Scheme on behalf of the PSS Members for such post-closing period
plus any amount of additional benefits to which a PSS Member shall be entitled
as a result of any salary increase by Purchaser during the post-closing period,
and (iii) shall pay administrative expenses related to the PSS Members during
post-closing participation in accordance with the UK Purchase Agreement. The UK
Purchase Agreement shall provide that those PSS Members who at the conclusion of
the post-closing period become members of any UK approved pension scheme
operated by any Acquired Subsidiary shall have the opportunity to direct that a
transfer payment be made from the Pilkington Scheme to such other scheme in
respect of such member's participation therein. Seller will ensure that the UK
Purchase Agreement (i) provides for the transfer value in such a situation to be
calculated on a past service reserve basis in accordance with the actuarial
method and assumptions set out in Schedule 6.12(d)(ii), (ii) contains a
--------------------
shortfall provision requiring Seller to make good any shortfall between the
amount, if any, actually transferred and the transfer value so calculated, and
(iii) contains a refund provision requiring Purchaser (or one of the Purchaser
Affiliates) to refund an amount by which the amounts actually transferred
exceeds the transfer value in the event there is any error in calculating or
transferring the amount of the transfer value.
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<PAGE>
6.13 Employee Benefit Plans.
----------------------
(a) Continuation of Plans. Schedule 2.20 lists the Plans (as such term is
--------------------- -------------
defined in Section 2.20) which the employees of the Contact Lens Product
Business participate in as of the Closing Date. Seller has identified on
Schedule 2.20 those Plans in which the Employees participate as of the Closing
- -------------
Date which (i) are not maintained by an Acquired Subsidiary but which will be
assumed by or transferred to the Purchaser (or an Acquired Subsidiary) as of the
Closing Date and (ii) are maintained by an Acquired Subsidiary but which will be
assumed or transferred to the Seller (or an affiliate) as of the Closing Date.
(b) Benefit Liabilities. Seller shall be responsible for and shall pay
-------------------
all liabilities (other than those liabilities to the extent accrued on the
Closing Net Current Assets statement) arising in connection with claims incurred
on or prior to the Closing Date with respect to the Employees under each
employee welfare benefit plan in which such Employees participate, including,
but not limited to all incurred but not reported claims. Except as otherwise
provided in this Agreement, Purchaser shall be responsible for and shall pay all
liabilities arising in connection with claims incurred after the Closing Date by
the Employees under each employee welfare benefit plan in which such Employees
participate after the Closing Date. For purposes of this Section, a claim shall
be considered incurred on the date treatment is rendered or a service performed.
Worker's compensation claims (other than those claims to the extent accrued on
the Closing Net Current Assets statement) of any Employee shall be the
responsibility and liability of Seller if the event giving rise to such claim
occurred on or prior to the Closing Date and shall be the responsibility and
liability of Purchaser if the event giving rise to the claim occurs after the
Closing Date. Except as otherwise provided herein, if any payment or benefit is
due to be paid or provided to any of the Employees (including, but not limited
to, the Foreign Transferred Employees) on or after the Closing Date, only with
respect to 13 month payments, Christmas bonuses or bonuses or commissions of any
kind or holiday pay, but excluding any payment or benefit under any employee
pension benefit plan, Seller shall pay to Purchaser within 10 days after
Purchaser's written demand to Seller such proportion of the payment or the cost
of the benefit as the period of pre-Closing employment with the Acquired
Subsidiaries or PD bears to the period of time which has elapsed since the
applicable payment or benefit was last paid or provided to the relevant
Employees (including, but not limited to, the Foreign Transferred Employees);
provided that nothing herein shall apply to salary or any other payments or
benefits that accrue wholly in respect of such Employee's service with
Purchaser, the Purchaser Affiliates or the Acquired Subsidiaries after the
Closing Date or to the extent that (i) Purchaser has increased any such payment
or benefit after the Closing Date or (ii) any such payment or benefit is
included as a liability in the statement of Closing Net Current Assets.
(c) COBRA. Acquired Subsidiaries shall be responsible for satisfying the
-----
requirements of Section 4980B of the Code to provide continuation coverage under
any
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<PAGE>
group health plan maintained by Acquired Subsidiaries (for which such
requirement with respect to any such plan is applicable).
(d) Pilkington Visioncare Pension Plan.
----------------------------------
(i) On or prior to the Closing Date, Seller shall cause the
Pilkington Visioncare Pension Plan (the "PBH Plan") to be transferred to
and assumed by PBH. After the Closing Date and within the time frame set
forth below, Purchaser shall cause assets and liabilities in the amount
determined herein to be transferred from the PBH Plan to a plan maintained
by one of the Seller or the Seller Affiliates (the "Successor Plan"). The
Successor Plan shall be tax qualified under Section 401 (a) of the Code
and shall preserve all optional forms of benefits and other rights within
the scope of Section 411(d)(6) of the Code. The transfer shall occur as
soon as practicable following the Closing, Date or such later date as
required by law (the "Transfer Date"), provided that, prior to the
Transfer Date, Pilkington shall either provide Purchaser with an opinion
of counsel or shall obtain a ruling from the Internal Revenue Service that
the transfer of assets from the PBH Plan to the Successor Plan shall not
adversely affect the qualified status of the Successor Plan and its
related trust under Sections 401 (a) and 501 (a) of the Code. Purchaser
and Seller shall cooperate in making all appropriate filings and taking
all appropriate actions required to implement the provisions of this
Section 6.13.
-------------
(ii) The PBH Plan shall retain all benefit obligations and
liabilities which relate to participants who, as of the Closing Date, are
employed by the Acquired Subsidiaries (whether actively employed or deemed
employed pursuant to a severance agreement or otherwise) and are accruing
benefits under the PBH Plan (the "Active Participants"). As of the
Transfer Date, the PBH Plan shall transfer and the Successor Plan shall
assume all benefit obligations and liabilities under the PBH Plan which
relate to all participants in the PBH Plan other than the Active
Participants, which shall include, but shall not be limited to retirees,
deferred vested participants, and beneficiaries (the "Inactive
Participants").
(iii) As of the Transfer Date, assets equal to the Pilkington Asset
Amount (as defined herein) shall be transferred to the Successor Plan. The
Pilkington Asset Amount shall be equal to the excess of the market value
of the PBH Plan assets as of the Closing Date (such amount to be adjusted
to reflect accrued benefit payments, expenses, and other activity of the
plan (including but not limited to interest or investment income) which is
directly attributable to the pre-closing period but which is not properly
reflected in the reported asset value on the Closing Date) over the PBH
Asset Amount, such amount adjusted for earnings as specified in clause
(iv) below. The PBH Asset Amount shall be determined as of the Closing
Date and shall be equal to the sum of (A) and (B) below:
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<PAGE>
(A) With respect to each Active Participant who has not received a
notice of termination as of the Closing Date (the "Continued Active
Employees"), the Projected Benefit Obligation, as determined in accordance
with Financial Accounting Standard Number 87 ("FAS 87"), using the
actuarial assumptions set forth on Schedule 6.13(a):
----------------
(B) With respect to each Active Participant who is not a Continued
Active Employee as of the Closing Date but who is continuing to accrue
benefits under the PBH Plan (the "Non-Continued Active Participants"), the
present value determined using the actuarial assumptions set forth on
Schedule 6.13(b), of the benefits payable under the PBH Plan, to the Non-
----------------
Continued Active Participant, including for such purpose all benefits
which the participant is expected to accrue under the PBH Plan on and
after the Closing Date.
The transfer contemplated herein shall comply with all requirements of
Sections 414(l) and 401(a)(12) of the Code and in no event shall the Pilkington
Asset Amount or the PBH Asset Amount be less than the amount determined pursuant
to Section 414(l) of the Code. Provided that the Pension Benefit Guaranty
Corporation does not successfully challenge the assumptions used by the PBH Plan
for purposes of the transfer, such amount shall be determined using the
assumptions specified in Section 412 of the Code for determining Current
Liability. For purposes of calculating this minimum asset amount only, the
interest rate will be the value at the lower end of the permissible range as
defined in Section 412(b)(5)(B)(ii) of the Code.
The calculations of the PBH Asset amount shall be performed by the
Enrolled Actuary of the PBH Plan. Both Purchaser and Seller reserve the right to
have such calculations reviewed by an Enrolled Actuary of their choice. If a
dispute arises regarding the application of actuarial principles under this
Section, a third Enrolled Actuary shall be selected by mutual agreement to
determine the appropriate transfer value.
(iv) The amount of assets transferred to the Successor Plan as of the
Transfer Date shall be equal to the Pilkington Asset Amount adjusted to reflect,
on a pro rata basis, the actual asset performance of the PBH Plan from the
Closing Date to the first day of the month prior to the Transfer Date and
credited with interest from that date until the Transfer Date at the rate of
7.5% per annum, and adjusted to reflect benefit payments and expenses paid after
the Closing Date by the PBH Plan which are related to the obligations being
transferred to the Successor Plan.
(v) Upon such transfer, none of the Acquired Subsidiaries, the Purchaser,
any affiliate of Purchaser, nor the PBH Plan shall have any liability or
obligation to the Inactive Participants for benefits accrued under the PBH Plan
or any further obligations in respect to such Inactive Participants.
Additionally, upon such transfer,
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<PAGE>
neither the Seller, any affiliate of Seller, nor the Successor Plan shall
have any liability or obligation to the Active Participants for benefits
accrued under the PBH Plan or any further obligations in respect of such
Active Participants.
(vi) Within thirty (30) days following the end of the "Salary
Continuance Period," Purchaser shall cause the PBH Plan to transfer, and
the Seller shall cause the Successor Plan to assume, all benefit
obligations and liabilities under the PBH Plan which relate to the Non-
Continued Active Participants (the date of the transfer shall be referred
to herein as the "Second Transfer Date"). For this purpose, the Salary
Continuance Period shall mean the date upon which none of the Non-
Continued Active Participants is accruing benefit service under the PBH
Plan, but in no event later than eighteen (18) months after the Closing
Date. As of the Second Transfer Date, Purchaser shall cause assets equal
to the Second Transfer Amount to be transferred to the Successor Plan. The
Second Transfer Amount shall be equal to the amount determined under
Section (iii)(B) above, adjusted on the same basis as set forth in Section
(iv) above with respect to the period beginning on the Closing Date and
ending on the Second Transfer Date.
(vii) Purchaser agrees that for the one-year period following the
Closing Date, the benefits provided under the PBH Plan with respect to the
Continued Active Employees shall be substantially similar to those
provided immediately prior to the Closing Date.
(viii) Purchaser and Seller shall share equally the costs incurred by
the PBH Plan's Enrolled Actuary in connection with the transfer of assets
from the PBH Plan to the Successor Plan. Purchaser and Seller shall be
solely responsible for their own expenses incurred in connection with any
independent review of the calculations performed by the PBH Plan's
Enrolled Actuary as set forth in (iii) and (vi) above.
(e) Revlon Litigation. Seller and/or the portion of the PBH Plan
-----------------
transferred to Seller (or one of the Seller Affiliates) shall have the right to
receive from Revlon, Inc. ("Revlon"), Executive Life Insurance Company
("Executive Life"), Aurora National Life Assurance Company ("Aurora"), and
National Organization of Life and Health Guaranty Associations ("NOLHGA"), and
their successors in interest, any and all payments that Revlon, Executive Life,
Aurora, and NOLHGA, and their successors in interest, or any of them, may make
in resolution or settlement of claims or reimbursement of advances, shortfall
payments, and/or other payments made to PBH employees who participated in the
Revlon Pension Plan prior to Seller's acquisition of the PBH business from
Revlon ("PBH Employees"), their beneficiaries and successors, together with any
interest thereon, with respect to obligations of Revlon, Executive Life, Aurora,
and/or NOLHGA to such PBH Employees, their beneficiaries, and successors under
Pilkington PLC et al. v. Ronald 0. Perelman, et al., Case No. 91-5195 WMB filed
- ---------------------------------------------------
in the United States District Court for the Central District of California (the
"Revlon Litigation"), the Modified Plan of Rehabilitation
-54-
<PAGE>
for Executive Life Insurance Company ("ELIC Rehabilitation Plan"), the annuity
contracts such PBH Employees received from Aurora pursuant to the ELIC
Rehabilitation Plan ("Aurora Annuities"), group annuity contract number CQ00123
("CQ00123"), or otherwise. The rights of Seller and the portion of the PBH Plan
transferred to Seller (or one of the Seller Affiliates) under this provision
shall include, but shall not be limited to, the right to receive reimbursement
of (i) shortfall amounts advanced by Seller, PBH, and/or the PBH Plan, or any of
them, during the conservatorship of Executive Life, which may be reimbursed by
payments from Revlon, by guaranty payments from NOLHGA and/or by payments of
"Account Value Increments" (as such term is defined in the ELIC Rehabilitation
Plan) from the various enhancement trusts established under the ELIC
Rehabilitation Plan, and (ii) amounts advanced by Seller, PBH, and/or the PBH
Plan, or any of them, prior to Executive Life's conservatorship with respect to
benefits then payable under CQ00123, but for which pay status did not commence
in a timely fashion due to administrative delays. Neither Purchaser, Purchaser
Affiliates (including PBH), nor Acquired Subsidiaries shall have any right to
receive from Revlon, Executive Life, Aurora, or NOLHGA, or any of their
successors in interest, any payment or reimbursement with respect to any such
obligations. In the event that Purchaser and/or PBH shall receive any such
payment or reimbursement, Purchaser immediately shall notify Seller of such
event and shall, within three (3) days from receipt, pay the amount so received
to Seller or such other person as Seller shall specify in writing to Purchaser
and/or PBH. Furthermore, Purchaser and/or PBH shall have no right of
reimbursement or contribution from Seller or the portion of the PBH Plan
transferred to Seller, or their successors, or any of them, with respect to any
amounts that Seller or the portion of the PBH Plan transferred to Seller, or
their successors, or any of them, or PBH Employees, their beneficiaries and
successors, or any of them, may receive with respect to any such obligation.
Notwithstanding the above, Seller shall be fully responsible for any and all
costs and expenses (including legal fees) of PBH, PBH Plan, Purchaser or any of
its affiliates, which are incurred or arise with respect to the matters
discussed herein, whether such amounts are incurred or arise before, on or after
the Closing Date, including all costs and expenses associated with the Revlon
Litigation, and Seller shall fully indemnify and save PBH, the PBH Plan,
Purchaser and its affiliates harmless against all such amounts. In the event a
settlement agreement is reached with Revlon or others which provides future
protection or benefits to the PBH Employees or the PBH Plan, Seller shall cause
such settlement protection and benefits to equally apply to the PBH Employees
that remain in the PBH Plan after the Closing Date and to the PBH Plan and
nothing herein shall limit the rights of such PBH Employees or the PBH Plan from
enforcing such rights. Nothing herein shall limit the right of the PBH Plan,
Purchaser or its affiliates from pursuing any cause of action that exists
against any party, including Revlon, Executive Life, Aurora or NOLHGA.
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<PAGE>
ARTICLE 7
CONDITIONS PRECEDENT TO PURCHASER'S PERFORMANCE
7.1 Conditions. All obligations of Purchaser to proceed with the Closing and
----------
to consummate the transactions contemplated hereby are subject to
fulfillment and satisfaction by Seller on or before the Closing Date of
each of the conditions precedent set forth in this Article 7. Purchaser may
---------
waive any or all of these conditions in whole or in part in a writing
executed by Purchaser; provided, however, that no waiver of a condition
-------- -------
shall constitute a waiver by Purchaser of any of its other rights or
remedies, at law or in equity, if Seller shall be in default of any of its
representations, warranties, or covenants under this Agreement.
7.2 Accuracy of Representations and Warranties. The representations and
------------------------------------------
warranties of Seller contained herein and in any certificate or other
writing delivered pursuant hereto or in connection herewith shall be true
and correct in all material respects on and as of the Closing Date as
though made at that time.
7.3 Performance of Seller. Seller shall have duly performed or complied with
---------------------
all of the covenants, acts, and obligations to be performed or complied
with by Seller hereunder at or prior to the Closing Date, including those
set forth in Article 9 hereof.
7.4 No Material Changes. During the period from April 30, 1996, to
-------------------
the Closing Date, there shall not have been any Material Adverse Change,
and the Acquired Assets or the Acquired Subsidiaries' Assets shall not have
sustained any uninsured material casualty or other loss, damage, or
destruction.
7.5 Absence of Litigation. No action, suit, or proceeding before any
---------------------
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have been
instituted or threatened on or before the Closing Date.
7.6 Consents. Seller shall have obtained and delivered copies to
--------
Purchaser of all necessary agreements and consents of any third parties to
the consummation of the transactions contemplated by this Agreement by
Seller, the Seller Affiliates and PD, solely in respect of agreements and
consents attributable to the Acquired Subsidiaries' and PD's businesses as
conducted prior to the Closing. All consents and approvals by governmental
agencies in the United States and the U.K. that are required for the
consummation by Purchaser of the transactions contemplated hereby to the
Closing Date will have been obtained.
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<PAGE>
7.7 Approval of Documents. The form and substance of all certificates,
---------------------
instruments, opinions, Schedules, and other documents delivered to
Purchaser under this Agreement shall be satisfactory in all respects to
Purchaser and its counsel.
7.8 Board Resolution. Seller shall have delivered to Purchaser a certified
----------------
copy of the resolution of the Boards of Directors of Seller and each of the
Seller Affiliates, or such other comparable document as may be required or
allowed in the applicable jurisdiction, authorizing, as applicable, the
execution of this Agreement by Seller and the consummation of the
transactions contemplated herein by Seller and each of the Seller
Affiliates.
7.9 Opinion of Counsel. Seller shall have delivered to Purchaser an opinion
------------------
of counsel to Seller, dated as of the Closing Date, in a form reasonably
acceptable to Purchaser.
7.10 Indebtedness for Borrowed Money; Guarantees. Purchaser will have received
-------------------------------------------
(a) payoff letters with respect to all of the Acquired Subsidiaries'
indebtedness for borrowed money (including any accrued interest related
thereto and a.1 prepayment premiums and penalties incurred in connection
with any prepayment thereof in connection with the transactions
contemplated by this Agreement) to be repaid as contemplated in Section 1.8
-----------
hereof and (b) satisfactory evidence of the termination of all guarantees
granted by any Acquired Subsidiary with respect to indebtedness for
borrowed money (including, without limitation, any such guarantee in favor
of National Westminster Bank), and with respect to each of the foregoing
clauses (a) and (b), releases of any and all Liens held by third parties
related thereto.
7.11 Real Property. Purchaser shall be able to obtain, at its expense and in
-------------
forms satisfactory to Purchaser's lending sources (the "Lenders"), title
insurance policies insuring Lenders' mortgage lien position in the Owned
Property, free and clear of all Liens, defects, claims, leases, rights of
possession or other encumbrances (other than the Permitted Encumbrances)
including such endorsements and affirmative coverages as Lenders may
reasonably request. Seller will provide, or will cause the Seller
Affiliates to provide, all affidavits and indemnities reasonably required
by the title insurers to issue such policies.
7.12 Financing. WJ shall have obtained financing on terms satisfactory to WJ in
---------
an amount sufficient to consummate the transactions contemplated by this
Agreement and to fund the continuing operations of the Contact Lens
Products Business.
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ARTICLE 8
CONDITIONS PRECEDENT TO SELLER'S PERFORMANCE
8.1 Conditions. All obligations of Seller to proceed with Closing are subject
----------
to fulfillment and the satisfaction on or before the Closing Date of each
of the conditions precedent set forth in this Article 8, unless otherwise
---------
waived, in writing, by Seller:
8.2 Accuracy of Representations and Warranties. The representations and
------------------------------------------
warranties of Purchaser contained herein and in any certificate or other
writing delivered pursuant hereto or in connection herewith shall be true
and correct in all material respects on and as of the Closing Date as
though made at that time.
8.3 Performance of Purchaser. Purchaser shall have duly performed or complied
------------------------
with all of the covenants, acts, and obligations to be performed or
complied with by Purchaser hereunder at or prior to the Closing Date.
8.4 Consents. Purchaser shall have obtained and delivered copies to Seller of
--------
all necessary agreements and consents of any third parties to the
consummation of the transactions contemplated by this Agreement by
Purchaser and the Purchaser Affiliates, solely in respect of agreements and
consents attributable to the Purchaser's and the Purchaser Affiliates'
businesses as conducted prior to the Closing. All consents and approvals by
governmental agencies in the United States and U.K. that are required in
order to prevent any illegal consummation by Seller of the transactions
contemplated hereby to the Closing Date (each, a "Required Approval") will
have been obtained; provided, however, that if Seller is required hereby to
consummate the transactions contemplate by this Agreement without obtaining
any governmental consent or approval that is required for such consummation
but that is not a Required Approval, Purchaser shall indemnify Seller and
its affiliates for any costs, expenses, losses, damages, fines, penalties,
or liabilities that result therefrom.
8.5 Approval of Documents. The form and substance of all certificates,
---------------------
instruments, opinions, Schedules, and other documents delivered to Seller
under this Agreement shall be satisfactory in all material respects to
Seller and its counsel.
8.6 Board Resolution. Purchaser shall have delivered to Seller a certified copy
----------------
of the resolution of the Boards of Directors of Purchaser and each of the
Purchaser Affiliates, or such other comparable document as may be required
or allowed in the applicable jurisdiction, authorizing, as applicable, the
execution of this Agreement by Purchaser and the consummation of the
transactions contemplated herein by Purchaser and each of the Purchaser
Affiliates.
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8.7 Opinion of Counsel. Purchaser shall have delivered to Seller an opinion of
------------------
counsel to Purchaser, dated as of the Closing Date, in a form reasonably
acceptable to Seller.
ARTICLE 9
THE CLOSING
9.1 Closing. The closing with respect to the transactions contemplated by this
-------
Agreement (the "Closing") shall take place at 10 a.m. on a business day
within five business days following the date as to which the conditions to
each party's obligations have been satisfied, but no later than seventy-
five (75) days after the date hereof, or at such other time as may be
agreed to by Seller and Purchaser, at the offices of WJ's financing
sources. For purposes of this Agreement, the "Closing Date" shall be deemed
to be the date that the Closing actually takes place. Seller and Purchaser
agree to use their reasonable best efforts to consummate the Closing within
forty-five (45) days after the date hereof.
9.2 Seller's Obligations. In addition to any other documents required to be
--------------------
delivered by Seller at Closing, Seller shall deliver, or cause the Seller
Affiliates to deliver, to Purchaser at Closing the following documents:
(a) Executed bills of sale and other instruments of transfer, dated as
of the Closing Date, conveying to WJ or one of the Purchaser Affiliates all of
PD's right, title, and interest in and to the Acquired Assets, all in form and
substance satisfactory to Purchaser;
(b) Executed assignments of all assignable governmental licenses,
regulatory approvals and permits and of all Intellectual Property of PD to be
conveyed pursuant to Section 1.2(f) hereof in a form suitable for recording
-----------
with the appropriate governmental entity;
(c) Stock certificates representing the Acquired Stock duly endorsed for
transfer to Purchaser or its designated affiliate or other instruments of
transfer;
(d) All books, records, and other data relating to the Contact Lens
Products Business, the Acquired Stock, and the Acquired Assets (other than
corporate records) of PD;
(e) Properly executed and acknowledged titles and other instruments of
transfer to all motor vehicles owned by PD and used exclusively in connection
with the Contact Lens Products Business;
(f) The consents as provided in Section 7.6 hereof;
-----------
(g) Certified resolutions of the Boards of Directors of Seller and each of
the Seller Affiliates, as provided for in Section 7.8 hereof;
-----------
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(h) The opinion of counsel as provided in Section 7.9 hereof;
-----------
(i) A certificate signed by an officer of Pilkington Holdings, Inc.
certifying that no withholding is required under Section 1445 of the Code in
connection with the transfer of any United States real property interest under
Section 897 of the Code as a result of the transactions contemplated by this
Agreement;
(j) A Transition Services Agreement between Purchaser and Seller, in the
form of Exhibit D attached hereto (the "Transition Services Agreement");
(k) The resignations of all directors and officers of each of the Acquired
Subsidiaries; and
(l) A certificate from an officer of the Seller, dated the Closing Date,
stating that the conditions set forth in Article 7 hereof have been satisfied.
---------
Seller, at any time before or after the Closing, will execute, acknowledge,
and deliver, or will cause to be executed, acknowledged, and delivered, any
further deeds, assignments, conveyances, and other assurances, documents, and
instruments of transfer, reasonably requested by Purchaser or the Purchaser
Affiliates, and will take, or cause to be taken, any other action consistent
with the terms of this Agreement that may reasonably be requested by Purchaser
or the Purchaser Affiliates, for the purpose of assigning, transferring,
granting, conveying, and confirming to Purchaser or the Purchaser Affiliates, or
reducing to possession, any or all property to be conveyed and transferred by
this Agreement.
9.3 Purchaser's Obligations. Purchaser shall deliver to Seller, at Closing,
-----------------------
the following:
(a) Wire transfer for the cash portion of the Purchase Price, as set
forth in Article 1 hereof;
---------
(b) The executed Note as provided for in Section 1.6;
-----------
(c) The consents as provided in Section 8.4;
-----------
(d) Certified resolutions of the Boards of Directors of Purchaser and
each of the Purchase, Affiliates, as provided for in Section 8.6 hereof; and
-----------
(e) The opinion of counsel as provided for in Section 8.7 hereof; and
-----------
(f) A certificate from an officer of the Purchaser, dated the Closing
Date, stating that the conditions in Article 8 hereof have been satisfied.
---------
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ARTICLE 10
POST-CLOSING
10.1 Survival of Representations and Warranties. Regardless of any
------------------------------------------
investigation at any time made by or on behalf of any party hereto, or of
any information any party may have in respect thereof, all representations
and warranties made hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall, except as otherwise set forth in
(ii) through (iv) or elsewhere in this Section 10.1, survive the Closing
------------
for a period of or until (i) March 31, 1998, (ii) the fifth anniversary of
the Closing Date, in the case of any breach of any representation or
warranty contained in Section 2.17, (iii) 30 days after the expiration of
------------
the relevant statute of limitations, in the case of any breach of any
representation or warranty contained in Section 2.12, and (iv) in the case
------------
of a breach of the representations and warranties contained in Section 2.28
------------
(Disclosure) and the Closing Date bring-down contained in the introductory
paragraph of Article 2 where the subject matter of such breach is addressed
---------
by one of the representations and warranties referred in clauses (i), (ii),
or (iii) above, the time limitation set forth in the relevant item of
clauses (i) through (iii) shall control when written notice of such breach
must be given (each of the foregoing clauses (i), (ii), (iii), and (iv)
collectively referred to as the "Indemnification Deadline"); provided, that
------------------------
so long as such written notice of an Actual Loss (as hereinafter defined)
is given on or prior to the Indemnification Deadline, such representations
and warranties shall continue to survive until such matter is resolved.
Notwithstanding the foregoing, any breaches of the representations and
warranties contained in Section 2.3 hereof will not be subject to any time
-----------
limitations. If any Actual Loss arising from a breach of representation or
warranty in Article 2 also constitutes an Actual Loss arising out of or
---------
related to the subject matter of Seller's indemnity (other than pursuant to
Section 10.2(a) of this Agreement), such Actual Loss will be deemed to be
---------------
the subject matter of Seller's indemnity (other than pursuant to Section
-------
10.2(a), and thus, not subject to the limitations set forth in this Section
------- -------
10.1 and Section 10.2. If any Actual Loss arising from a breach of
---- ------------
representation or warranty in Article 3 also constitutes an Actual Loss
---------
arising out of or related to the subject matter of Purchaser's indemnity
(other than pursuant to Section 10.3(a) of this Agreement), such Actual
---------------
Loss will be deemed to be the subject matter of Purchaser's indemnity
(other than pursuant to Section 10.3(a)), and thus, not subject to the
---------------
limitations set forth in this Section 10.1 and Section 10.3. Purchaser
------------ ------------
expressly acknowledges that it has not relied on any warranties, promises,
understandings, or representations, express or implied, of Seller, the
Seller Affiliates or any' agent of Seller or the Seller Affiliates relating
to the Acquired Assets or the Acquired Subsidiaries' Assets and operations
of the Acquired Subsidiaries that are not contained in this Agreement or in
any certificate or schedule delivered by Seller to Purchaser.
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10.2 Indemnification of Purchaser by Seller. Seller (for purposes of this
--------------------------------------
Section 10.2 only, "Indemnifying Party") shall indemnify, defend, and
------------
hold harmless Purchaser, its affiliates, the Acquired Subsidiaries, and
their respective officers, directors, and shareholders, successors and
assigns, from and against any and all costs, expenses, losses, damages,
fines, penalties, or liabilities (including, without limitation, interest
which may be imposed in connection therewith, court costs, litigation
expenses, reasonable attorneys' fees, and accounting fees) ("Actual
Losses") actually incurred by Purchaser, its affiliates, or the Acquired
Subsidiaries with respect to, in connection with, arising from, or
alleged to result from, arise out of, or be in connection with:
(a) A breach by the Indemnifying Party of any representation or warranty
made by the Indemnifying Party and contained in this Agreement or in any
certificate or other document delivered by said party to Purchaser or the
Purchaser Affiliates hereunder or thereunder;
(b) A breach by the Indemnifying Party of any covenant, restriction,
or agreement made by or applicable to the Indemnifying Party (including,
without limitation, any failure to pay or discharge any Excluded Liability)
and contained in this Agreement or in any certificate or other document
delivered by said party to Purchaser or the Purchaser Affiliates hereunder or
thereunder;
(c) Except for any Assumed Liabilities and except for any liability
imposed on the Purchaser pursuant to the Fair Trading Act of 1973, as in
effect in the U.K., any other claim, debt, suit, cause of action,
investigation, or proceeding of any kind whatsoever, whether instituted or
commenced prior to, on or after the Closing Date and which relates to or
arises from the Contact Lens Products Business, Acquired Stock, Acquired
Assets, or Acquired Subsidiaries' Assets or operations of the Acquired
Subsidiaries or PD on or before the Closing Date (including, without
limitation, any product liability claim or action arising from or relating to
any facts or circumstances occurring on or prior to the Closing Date), whether
or not disclosed on any schedule hereto;
(d) Any claims of any brokers or finders, claiming by, through or
under the Seller, its affiliates, the Acquired Subsidiaries or PD, for any
amount in connection with the transactions contemplated by this Agreement;
(e) All loss, expense, or damage suffered as the direct result of the
Indemnifying Party's failure to pay or perform those liabilities expressly
assumed or undertaken under this Agreement;
(f) Any liability or investigatory, corrective or remedial obligation
under any Environmental, Health and Safety Laws relating to or arising from
the past or current facilities, properties or operations of the Contact Lens
Product Business (including without
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limitation the Acquired Subsidiaries, the Acquired Assets and the Acquired
Subsidiaries' Assets), whether or not disclosed on any schedule hereto,
including without limitation, any matters disclosed on Schedule 2.17 hereto
-------------
(including without limitation any such liability or obligation relating to the
offsite treatment, storage, or disposal of hazardous materials, substances or
wastes), except to the extent the factual basis for any such liability or
obligation is caused or created by, or exacerbated through the negligence or
willful misconduct of, Purchaser, in connection with the operation of the
Acquired Subsidiaries, the Acquired Assets or the Acquired Subsidiaries'
Assets after the Closing Date. With respect to matters for which Seller is
obligated to indemnify Purchaser and its affiliates pursuant to this
subparagraph, Purchaser agrees to use reasonable efforts, where it is within
Purchaser's or the applicable Purchaser Affiliates' authority to do so and
while complying with all legal requirements and reasonably mitigating risks to
human health and the environment, to address such matters in a commercially
reasonable and cost-effective manner;
(g) Any liability or obligation arising from or relating to the past,
current, or future ownership, use or operation of any assets, properties,
facilities or operations of the Acquired Subsidiaries that were not owned,
operated, used or conducted by the Contact Lens Product Business as of the
Closing Date (including, without limitation, any liability or obligation
arising from or relating to the ownership, use, operation or disposition of
such businesses effected pursuant to (i) the Agreement of Purchase and Sale of
Assets between Pilkington plc and certain of its affiliates and Allergan, Inc.
(U.S.A.) and certain of its affiliates, dated November 27, 1995, (ii) the
Agreement for the Purchase and Sale of Assets by and among Pilkington
Holdings, Inc., Paragon Optical Company, Paragon Acquisition Corporation, and
certain other parties, dated as of October 17, 1995, (iii) the Purchase
Agreement between Pilkington plc and certain of its subsidiaries and Sola
Holdings, Inc., dated as of September 1, 1993, (iv) the Agreement for the Sale
and Purchase of the Whole of the Issued Share Capital of Combined Optical
Laboratories Ltd. dated May 4, 1990, by and among Pilkington plc, Workgood
Limited, and Gartland and Whalley Securities Limited, and (v) the Purchase
Agreement dated as of January 30, 1992 by and among Pilkington Visioncare Inc.
and Pilkington Visioncare Canada Inc., and Coburn Acquisition Corp.
(h) Any liability or obligation arising under Title IV of ERISA with
respect to any employee pension benefit plan (as defined in Section 3(2) of
ERISA) maintained by Seller or any member of Seller's controlled group (as
defined in Section 414 of the Code) other than any plan maintained by the
Contact Lens Product Business, and
(i) Except any liabilities arising pursuant to or under this Agreement,
effective upon the Closing, Seller, on behalf of itself and its affiliates,
hereby irrevocably waives, releases and discharges forever the Acquired
Subsidiaries from any and all liabilities and obligations to Seller or its
affiliates, of any kind or nature whatsoever, whether in its, their or his
capacity as Seller hereunder, as a stockholder, officer or director of any
Acquired Subsidiary or otherwise, including, without limitation, in respect of
rights of contribution or indemnification, in each case whether absolute or
contingent, liquidated or unliquidated, and
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whether arising hereunder or under any other agreement or understanding or
otherwise at law or equity, and Seller hereby covenants and agrees that it
will indemnify and hold harmless Purchaser, its affiliates, and the Acquired
Subsidiaries from and against all such liabilities or obligations, including,
without limitation, all such liabilities or obligations incurred with respect
to any person who was an officer or director of any Acquired Subsidiary on or
prior to the Closing Date.
The Indemnifying Party shall not be required to indemnify Purchaser and its
affiliates pursuant to Section 10.2(a) unless and until the aggregate of
---------------
all Actual Losses pursuant to Section 10.2(a) exceeds One Million Five Hundred
---------------
Thousand and No/100 Dollars ($1,500,000) (the "Section 10.2(a) Basket") and in
such case (i) the Purchaser's and its affiliates' right to recover for Section
-------
10.2(a)" claims shall apply only to the excess of the Section 10.2(a) Basket;
- -------
(ii) Purchaser's and its affiliates' right to recover for Section 10.2(a) claims
---------------
shall not apply to individual Actual Losses in the amount of Twenty-Five
Thousand and No/100 Dollars ($25,000) or less (the "Minimum Basket"); provided
that an individual claim for Actual Losses shall include any claims which arise
out of or relate to any related facts, events or circumstances; and (iii) in no
event shall the aggregate amount of indemnification in excess of the Section
10.2(a) Basket under Section 10.2(a) and 10.2(f) by the Indemnifying Party
--------------- -------
exceed fifty percent (50%) of the Purchase Price (the "Cap Amount"); provided,
--------
however, that the Section 10.2(a) Basket, the Minimum Basket, and the Cap Amount
- -------
shall not apply to any Actual Losses relating to Section 2.12 (Taxes), and that
------------
the Section 10.2(a) Basket and Minimum Basket shall not apply to Actual Losses
relating to Section 2.17 (Environmental Matters) and Actual Losses paid under
------------
Section 2.12 will not count against the Section 10.2(a) Basket or the Cap Amount
- ------------
and Actual Losses paid under Section 2.17 will not count against the Section
------------
10.2(a) Basket. Notwithstanding anything to the contrary set forth in this
Section 10.2, the Indemnifying Party shall not be required to indemnify
- ------------
Purchaser and its affiliates for a breach of Section 4.3 of this Agreement
-----------
unless and until the aggregate of all Actual Losses for all breaches of Section
A.3 exceeds One Million Dollars (the "Section 4.3 Basket"), at which point the
Indemnifying Party will be obligated to indemnify Purchaser and its affiliates
against all such Actual Losses relating back to the first dollar; provided that
(i) Purchaser's and its affiliates' right to recover for breaches of Section 4.3
claims shall not apply to individual Actual Losses in the amount of Twenty-Five
Thousand and No/100 Dollars ($25,000) or less; (ii) an individual claim for
Actual Losses shall include any claims which arise out of or relate to any
related facts, events or circumstances; (iii) Actual Losses that are counted
against the Section 4.3 Basket shall not also be counted against the Section
10.2(a) Basket; and (iv) Actual Losses counted against the Section 10.2(a)
Basket shall not also be counted against the Section 4.3 Basket.
10.3 Indemnification of Seller by Purchaser. Purchaser (for purposes
--------------------------------------
of this Section 10.3 only, "Indemnifying Party") shall indemnify, defend,
------------
and hold harmless Seller, its affiliates and their respective officers,
directors, and shareholders, successors and assigns, from and against any
and all costs, expenses, losses, damages, fines, penalties, or
liabilities (including, without limitation, interest that may be imposed
in connection therewith, court costs, litigation expenses, reasonable
attorneys' fees, and accounting fees) ("Actual Losses") actually incurred
by Seller, its affiliates, or
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such officers, directors, shareholders, successors, or assigns with respect
to, in connection with, arising from, or alleged to result from, arise out
of, or be in connection with:
(a) A breach by the Indemnifying Party of any representation or
warranty made by the Indemnifying Party and contained in this Agreement or in
any certificate or other document delivered by said party to Seller hereunder
or thereunder;
(b) A breach by the Indemnifying Party of any covenant, restriction,
or agreement made by or applicable to the Indemnifying Party and contained in
this Agreement or in any certificate or other document delivered by the
Indemnifying Party to Seller hereunder or thereunder;
(c) Any claims of any brokers or finders, claiming by, through, or
under the Purchaser or its affiliates for any amount in connection with the
transactions contemplated by this Agreement;
(d) All loss, expense, or damage suffered as the direct result of the
Indemnifying Party's failure to pay or perform those liabilities expressly
assumed or undertaken under this Agreement; and
(e) Except for any Excluded Liabilities, any other claim, debt, suit,
cause of action, investigation, or proceeding of any kind whatsoever
instituted or commenced after the Closing Date which relates to or arises from
the Indemnifying Party's or its affiliates' operation of the Contact Lens
Products Business or its or any of their ownership or operation of the
Acquired Assets or the Acquired Subsidiaries' Assets or the Acquired
Subsidiaries after the Closing Date.
The Indemnifying Party shall not be required to indemnify Seller and its
affiliates unless and until the aggregate of all Actual Losses pursuant to
Section 10.3(a) exceeds One Million Five Hundred Thousand and No/100 Dollars
- ---------------
($1,500,000) (the "Basket") and in such case (i) Seller's and its affiliates'
right to recover for Section 10.3(a) claims shall apply only to the excess of
---------------
the Basket; (ii) Seller's and its affiliates' right to recover for Section
-------
10.3(a) claims shall not apply to individual Actual Losses in the amount of
- -------
Twenty-Five Thousand and No/100 Dollars ($25,000) or less (the "Minimum
Basket"); provided that an individual claim for Actual Losses shall include any
claims which arise out of or relate to any related facts, events, or
circumstances, and (iii) in no event shall the aggregate amount of
indemnification in excess of the Basket under Section 10.3(a) by the
---------------
Indemnifying Party exceed fifty percent (50%) of the Purchase Price (the "Cap
Amount").
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10.4 Procedure for Indemnification.
-----------------------------
(a) The party which is entitled to be indemnified hereunder (the
"Indemnified Party") shall promptly give written notice hereunder to the party
required to indemnify (the "Indemnifying Party") after obtaining notice of any
claim as to which recover), may be sought against the Indemnifying Party
because of the indemnity in Section 10.2 and Section 10.3 hereof and, if such
------------ ------------
indemnity shall arise from the claim of a third party, shall permit the
Indemnifying Party to assume the defense of any such claim and any litigation
resulting from such claim. Notwithstanding the foregoing, the right to
indemnification hereunder shall not be affected by any failure of an
Indemnified Party to give such notice, or delay by an Indemnified Party in
giving such notice unless, and then only to the extent that, the rights and
remedies of the Indemnifying Party shall have been prejudiced as a result of
the failure to give, or delay in giving, such notice. Failure by an
Indemnifying Party to notify an Indemnified Party of its election to defend
any such claim or action by a third party within thirty (30) days after notice
thereof shall have been given to the Indemnifying Party shall be deemed a
waiver by the Indemnifying Party of its right to defend such claim or action.
(b) Subject to Section 10.2 or Section 10.3, as applicable, if the
------------ ------------
Indemnifying Party assumes the defense of such claim or litigation resulting
therefrom, the obligations of the Indemnifying Party hereunder as to such
claim shall include taking all steps necessary in the defense or settlement of
such claim or litigation (including, without limitation, using reasonable
efforts to substitute itself as the real party-in-interest in any such claim
or litigation to the extent a procedure for such substitution is available)
and holding the Indemnified Party harmless from and against any and all
damages caused by or arising out of any settlement approved by the
Indemnifying Party or any judgment in connection with such claim or
litigation. The Indemnifying Party shall not, in the defense of such claim or
any litigation resulting therefrom, consent to entry of any judgment (other
than a judgment of dismissal on the merits without costs) except with the
written consent of the Indemnified Party, or enter into any settlement (except
with the written consent of the Indemnified Party) which does not include as
an unconditional term thereof the giving by claimant or plaintiff to the
Indemnified Party of a release from all liability in respect of such claim or
litigation. Anything in this Section 10.4 to the contrary notwithstanding, the
------------
Indemnified Party may, with counsel of its choice and at its expense,
participate in the defense of any such claim or litigation. In all cases, the
Indemnified Party shall cooperate with the Indemnifying Party in the defense
of claims or litigation, including by making employees, information, and
documentation reasonably available.
(c) If the Indemnifying Party shall not assume the defense of any such
claim by a third party or litigation resulting therefrom after receipt of
notice from such Indemnified Party, the Indemnified Party may defend against
such claim or litigation in such manner as it deems appropriate, and unless
the Indemnifying Party shall deposit with the Indemnified Party a sum
equivalent to the total amount demanded in such claim or litigation plus the
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Indemnified Party's estimate of the costs of defending the same, the
Indemnified Party may settle such claim or litigation on such terms as it may
deem appropriate and, subject to Section 10.2 or Section 10.3, as applicable,
------------ ------------
the Indemnifying Party shall promptly reimburse the Indemnified Party for the
amount of such settlement and for all damages incurred by the Indemnified
Party in connection with the defense against or settlement of such claim or
litigation.
(d) Subject to Section 10.2 or Section 10.3, as applicable, the
------------ ------------
Indemnifying Party shall promptly reimburse the Indemnified Party for the
amount of any judgment rendered with respect to an), claim by a third party in
such litigation and for all damage incurred by the Indemnified Party in
connection with the defense against such claim or litigation, whether or not
resulting from, arising out of, or incurred with respect to, the act of a
third party.
10.5 Informal Dispute Resolution.
---------------------------
(a) In an effort to resolve informally and amicably any claim,
controversy, or dispute arising out of or related to the interpretation,
performance, or reach of this Agreement (a "Dispute") without resorting to
litigation, each party shall notify the other in writing of any Dispute
hereunder that requires resolution. Such notice shall set forth the nature of
the Dispute, the amount involved, if any, and the remedy sought. Each party
shall designate an employee to investigate, discuss and seek to settle the
matter between them. If the parties are unable to settle the matter within
thirty (30) days after such notification, the matter shall be submitted to the
Chief Executive Officer of WJ and the Chief Executive Officer of Pilkington
for consideration. If settlement cannot be reached through their efforts
within an additional thirty (30) days (or such longer time period as they
shall agree upon in writing), then Purchaser and Seller may thereafter take
such actions as they deem appropriate. Purchaser and Seller agree that any
applicable statute of limitations shall be tolled during the pendency of such
informal dispute resolution process and that none of them shall raise or
assert any claim of laches or other legal or equitable principle of limitation
or repose of action based upon such process. Purchaser and Seller agree that
in no event shall any of them be subject to the awarding of any punitive or
exemplary damages in any legal action arising out of or related to this
Agreement.
(b) If a Dispute has not been resolved by negotiation as provided in
Section 10.5(a) above, then upon the written request of either party, such
---------------
Dispute shall be resolved by binding arbitration conducted in accordance with
the Rules of the Center for Public Resources Institute for Dispute Resolution
by a sole, arbitrator. To the extent not governed by such rules, such
arbitrator shall be instructed by the parties to set a schedule for
determination of such Dispute that is reasonable in the circumstances. The
arbitration will be conducted in New York City. The arbitration will be
governed by the United States Arbitration Act, 9 U.S.C. Sections 1-16 and the
Patent Arbitration Act, 35 U.S.C.
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Section 294. Judgment upon the award rendered by the arbitrator may be entered
by any court having jurisdiction.
(c) In the event that the parties have not resolved a Dispute pursuant
to Section 10.5(a) above, the parties hereby acknowledge and agree that the
---------------
negotiation shall be deemed in the nature of settlement discussions and that
neither the fact that the negotiation took place nor any statement or conduct
of any participant in such negotiations shall be admissible into evidence in
any subsequent arbitration or other Dispute resolution involving the parties,
and any disclosure in any form, including oral, by any person participating in
such negotiations shall not operate as a waiver of any privilege.
(d) Nothing in this Section 10.5 shall be construed to impair the
------------
right of either party to seek injunctive or other equitable relief to prevent
a breach or alleged breach of this Agreement.
10.6 Use of Barnes Hind Name. Not later than thirty (30) days after the
-----------------------
Closing, Seller shall remove, or cause to be removed, the name "Barnes
Hind" and the Barnes-Hind logo from the exterior of Seller's and its
affiliates' premises. On or as soon as reasonably practicable following the
Closing, but in no event more than ninety (90) days thereafter, Seller
shall destroy, or cause to be destroyed, all existing packaging, print
materials (including letterhead, stationery or business cards), promotional
materials, point of sale materials and advertising copy bearing the "Barnes
Hind" name or logo, and Seller agrees to cease, and to cause its affiliates
to cease, using the "Barnes Hind" name and logo or any variant thereof or
trademark or name similar thereto. All registrations of the trade name,
"PBH," "Pilkington Barnes Hind," and all variants thereof and applications
for registration therefor, whether owned by any of Sellers or the Acquired
Subsidiaries, shall be canceled or all documents necessary to cancel such
registrations and applications shall have been filed with the applicable
government authority, prior to Closing or as soon as reasonably practicable
thereafter. Seller hereby agrees that from and after the date of Closing it
shall not use, any registered or unregistered trademark or service mark
relating to the Contact Lens Products Business.
ARTICLE 11
MISCELLANEOUS
11.1 Written Agreement to Govern. This Agreement, that certain
---------------------------
confidentiality agreement dated June 18, 1996 between Pilkington and WJ
Holding, and that certain confidentiality agreement between Pilkington and
Bain Capital, Inc. (except to the extent any provision of either of the
aforementioned confidentiality agreements is inconsistent with any
provision in this Agreement) set forth the entire understanding and
supersede all prior oral or written agreements among the parties hereto
relating
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<PAGE>
to the subject matter contained herein and therein, and merge all prior and
contemporaneous discussions among them. No party hereto shall be bound by
any definition, condition, representation, warranty, covenant, or provision
other than as expressly stated in this Agreement and each of the
aforementioned confidentiality agreements (to the extent described in the
preceding sentence) or as he,,-.after set forth in a written instrument
executed by such party or by a duly authorized representative of such
party.
11.2 Severability. The parties hereto expressly agree that it is not the
------------
intention of any party hereto to violate any public policy, statutory, or
common law rules, regulations, treaties, or decisions of any government or
agency thereof. If any provision of this Agreement is judicially or
administratively interpreted or construed as being in violation of any such
provision, such articles, sections, sentences, words, clauses, or
combinations thereof shall be inoperative, and the remainder of this
Agreement shall remain binding, upon the parties hereto.
11.3 Notices and Other Communications. Every notice or other
--------------------------------
communication required, contemplated, or permitted by this Agreement by any
party shall be in writing and shall be delivered either by personal
delivery, telegram, facsimile, private courier service, or by certified or
registered mail, postage prepaid, return receipt requested, addressed to
the party to whom intended at the following address:
(a) If to Purchaser:
WESLEY-JESSEN CORPORATION
333 E. Howard Avenue
Des Plaines, Illinois 60018-5903
Attention: Chief Executive Officer
Copy to:
WESLEY-JESSEN HOLDING, INC.
c/o Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Attention: Stephen G. Pagliuca
Adam W. Kirsch
John W. Maki
and
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<PAGE>
KIRKLAND & ELLIS
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Jeffrey C. Hammes
Gary M. Holihan
(b) If to Seller:
PILKINGTON plc
Prescot Road
St. Helens, Merseyside
England, WA10 3TT
Attention: Company Secretary
Copy to:
SNELL & WILMER L.L.P.
One Arizona Center
400 East Van Buren, 19th Floor
Phoenix, Arizona 85004-0001
Attention: Terry Morris Roman
or at such other address as the intended recipient shall from time to time
designate by written notice delivered in accordance herewith. Notice by courier
or certified or registered mail shall be effective on the date it is sent. All
notices and communications required, contemplated, or permitted by this
Agreement to be delivered in person shall be deemed to have been delivered to
and received by the addressee, and shall be effective, on the date of personal
delivery. Any notice transmitted by telegram or facsimile shall be deemed to
have been delivered to and received by the addressee, and shall be effective, on
the date said notice is delivered to the telegram company or facsimile operator
for transmission.
11.4 Counterparts. This Agreement may be executed in any number of
------------
counterparts, and each counterpart shall constitute an original instrument,
but all such separate counterparts shall constitute one and the same
agreement.
11.5 Governing Law. The validity, construction, and enforceability of this
-------------
Agreement shall be governed in all respects by the laws of the State of
California, without regard to its conflict of laws rules. Each of Seller
and Purchaser hereby submits to the co-exclusive jurisdiction of the United
States courts in California, and the courts of the State of California,
over any lawsuit under this Agreement and waives any objection based on
venue or forum non conveniens with respect to any action instituted
therein. Each of the Seller and the Purchaser hereby waives the necessity
for personal service of any and all process upon it and consents that all
such service of process may be
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<PAGE>
made by registered or certified mail (return receipt requested), with a
copy also being sent by facsimile (with receipt confirmed), in each case
directed to Seller or Purchaser at its address set forth in, and with
copies sent as required by, Section 11.3, and service so made shall be
------------
deemed to be completed on the date of actual receipt. Each of the Seller
and the Purchaser hereby consents to service of process as aforesaid.
Nothing in this Section 11.5 will prohibit personal service in lieu of the
------------
service by mail contemplated herein.
11.6 Currency. All dollar amounts referred to in this Agreement are in
--------
United States Dollars, unless otherwise expressly stated.
11.7 Successors and Assigns. This Agreement shall be binding upon and
----------------------
shall inure to the benefit of the parties hereto and their respective
heirs, executors, administrators, personal representatives, successors,
and assigns; provided, however, that this Agreement may not be assigned
-------- -------
by any party hereto without the prior written consent of the other
parties, except that Purchaser may assign this Agreement or any of its
rights hereunder (i) to any of its affiliates or (ii) as collateral
security to any of Purchaser's financing sources; provided, further, that
Purchaser shall remain primary obligor under this Agreement
notwithstanding any such assignment.
11.8 Further Assurances. At any time on or after the date hereof, the
------------------
parties hereto shall each perform such acts, execute and deliver such
instruments, assignments, endorsements and other documents and do all such
other things consistent with the terms of this Agreement as may be
reasonably necessary to accomplish the transactions contemplated in this
Agreement or otherwise carry out the purpose of this Agreement.
11.9 Gender, Number and Headings. The masculine, feminine, or neuter
---------------------------
pronouns used herein shall be interpreted without regard to gender, and
the use of the singular or plural shall be deemed to include the other
whenever the context so requires.
11.10 Schedules and Exhibits. Schedules and Exhibits referred to herein
----------------------
and attached hereto are incorporated herein by such reference as if fully
set forth in the text hereof.
11.11 Waiver of Provisions. The terms, covenants, representations, warranties,
--------------------
and conditions of this Agreement may be waived only by a written
instrument executed by the party waiving compliance. The failure of any
party at any time to require performance of any provisions hereof shall in
no manner affect the right at a later date to enforce the same. No waiver
by any party of any condition, or breach of any provision, term, covenant,
representation, or warranty contained in this Agreement, whether by
conduct or otherwise, in any one or more instances, shall be deemed to be
or construed as a further or continuing waiver of any such condition or of
the
-71-
<PAGE>
breach of any other provision, term, covenant, representation, or warranty
of this Agreement.
11.12 Specific Performance. Each party's obligations under this Agreement
--------------------
are unique. If any party should default in its obligations under this
Agreement, each party acknowledges that it would be extremely
impracticable to measure the resulting damages; accordingly, the non-
defaulting party, in addition to any other available rights or remedies,
may sue in equity for specific performance, and each party expressly
waives the defense that a remedy in damages will be adequate.
Notwithstanding any breach or default by any of the parties of any of
their respective representations, warranties, covenants, or agreements
under this Agreement, if the purchase and sale contemplated by it shall be
consummated at the Closing, each of the parties waives any rights that it
may have to rescind this Agreement or the transaction consummated by it;
provided, however, this waiver shall not affect any other rights or
-------- -------
remedies available to the parties under this Agreement or under the law.
11.13 No Prejudice. This Agreement has been jointly prepared by the
------------
parties and the terms hereof shall not be construed in favor of or against
any party due to its participation in such preparation.
11.14 Costs. If any legal action or any arbitration or other proceeding is
-----
brought for the enforcement of this Agreement, or because of air alleged
dispute, breach, default, or misrepresentation in connection with any of
the provisions of this Agreement, the successful or prevailing party or
parties shall be entitled to recover reasonable attorneys' fees and other
costs incurred in that action or proceeding, in addition to any other
relief to which it or they may be, entitled.
11.15 Termination.
-----------
(a) Termination of Agreement. This Agreement may be terminated as follows:
------------------------
(i) Purchaser and Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing.
(ii) Purchaser may terminate this Agreement by giving written notice
to Seller at any time prior to the Closing in the event Seller is in
breach, and Seller may terminate this Agreement by giving written notice
to Purchaser at any time prior to the Closing in the event Purchaser is in
breach, of any material representation, warranty, or covenant contained in
this Agreement in any material respect (by giving written notice of its
intention to terminate and stating in detail the grounds therefor). A
party receiving the notice shall have thirty (30) days from the receipt
thereof to cure the breach, at which time this Agreement shall terminate
if the breach has not
-72
<PAGE>
been cured or reasonable commercial efforts are not being taken by the
breaching party to cure.
(iii) Seller may terminate this Agreement in accordance with
Section 5.3 above.
-----------
(iv) Purchaser or Seller may terminate this Agreement by giving
written notice to the other party if the Closing has not occurred seventy-
five (75) days after the date hereof.
(b) Effect of Termination. All obligations of the parties hereunder shall
---------------------
cease upon any termination pursuant to Section 11.15a ; provided, however, that
-------------- -------- -------
(i) the provisions of this Section 11.15 and of Sections 6.1, 10.5, 11.12 and
------------- ------------ ---- -----
11.18 shall survive any termination of this Agreement; and (ii) nothing herein
- -----
shall relieve any party from any liability for a material breach in any of its
representations or warranties contained herein or a material failure to comply
with any of its covenants, conditions or agreements contained herein.
11.16 Section and Paragraph Headings. Article and Section headings in this
------------------------------
Agreement for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
11.17 Amendment. This Agreement may be amended only by an instrument in
---------
writing executed by each of the parties hereto.
11.18 Expenses. Except as otherwise expressly provided herein, Seller, on
--------
the one hand, and Purchaser, on the other hand, shall bear its own
expenses incident to its obligations under and in respect of this
Agreement and the transactions contemplated hereby, including without
limitation, all fees of counsel, consultants, and accountants and all HSR
Act filing fees.
11.19 No Third Party Beneficiaries. Nothing herein expressed or implied
----------------------------
is intended or shall be construed to confer upon or give to any person,
fin-n or corporation, other than the parties hereto and their respective
permitted successors and assigns, any rights or remedies under or by
reason of this Agreement, such third parties specifically including,
without limitation, employees or creditors of the Acquired Subsidiaries
and PD.
11.20 Inconsistencies. if there is any inconsistency between this Agreement and
---------------
any Foreign Agreement, then the provisions of this Agreement will control.
11.21 RTPA Suspension Clause. To the extent that any provision of this
----------------------
Agreement or arrangement of which it forms part constitutes a restriction
or information provision within the meaning of the Restrictive Trade
Practices Act 1976 ("the Act") so as to
-73-
<PAGE>
render the Agreement or arrangement as the case may be liable to
registration under the Act, no such provision shall take effect until the
day after particulars of the Agreement or arrangement have been furnished
to the Director General of Fair Trading in accordance with the Act.
11.22 Definition of Material. For purposes of this Agreement, the capitalized
----------------------
term "Material" will mean, having an economic consequence or effect, or
involving an amount in excess of, twenty-five thousand dollars ($25,000).
11.23 Definition of affiliate. For purposes of this Agreement, the
-----------------------
uncapitalized term "affiliate" shall mean any corporation or entity
controlling, controlled by, or under common control with Purchaser or
Seller, as the case may be.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
"SELLER" PILKINGTON plc
By: /s/ Alex D. Wilson
---------------------------------
Name: Alex D. Wilson
-------------------------------
Title: Corporate Financial Officer
------------------------------
"PURCHASER" WESLEY-JESSEN CORPORATION
By: /s/ Adam Kirsch
---------------------------------
Name: Adam Kirsch
-------------------------------
Title: Director
------------------------------
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed as of the date first written above.
"SELLER" PILKINGTON plc
By: /s/ Alex D. Wilson
--------------------------------
Name: Alex D. Wilson
------------------------------
Title: Corporate Financial Officer
-----------------------------
"PURCHASER" WESLEY-JESSEN CORPORATION
By: /s/ Adam Kirsch
--------------------------------
Name: Adam Kirsch
------------------------------
Title: Director
-----------------------------
-75-
<PAGE>
SCHEDULE INDEX
DEFINITIONS.........................................................1
SCHEDULE 1.7(a)
RESTRUCTURING ACTIVITIES.......................................1
SCHEDULE 1.7(b)
ACCOUNTING POLICIES AND PROCEDURES.............................2
SCHEDULE 1.9
PURCHASE PRICE ALLOCATION......................................3
SCHEDULE 2.1
ORGANIZATION AND STANDING......................................4
SCHEDULE 2.3
OWNERSHIP OF CAPITAL STOCK; RELATED RIGHTS.....................5
SCHEDULE 2.4
SUBSIDIARIES...................................................8
SCHEDULE 2.5
UK FINANCIAL STATEMENTS........................................9
SCHEDULE 2.6
LABOR AND EMPLOYMENT MATTERS..................................10
SCHEDULE 2.7
TITLE AND CONDITION OF ACQUIRED ASSETS........................13
SCHEDULE 2.8
MATERIAL CHANGES..............................................14
SCHEDULE 2.9
REAL PROPERTY.................................................15
SCHEDULE 2.10
LITIGATION....................................................27
SCHEDULE 2.11
CONSENTS......................................................30
76
<PAGE>
SCHEDULE 2.12
FAX CLAIMS AND RELATED INFORMATION............................32
SCHEDULE 2.13
PERMITS.......................................................33
SCHEDULE 2.14
COMPLIANCE WITH LAWS..........................................39
SCHEDULE 2.15
CONTRACTS.....................................................40
SCHEDULE 2.16
PATENTS AND PATENT APPLICATIONS, INTELLECTUAL PROPERTY
LICENSES, CONSULTING AGREEMENTS, RESEARCH AND DEVELOPMENT
PROJECTS, TRADEMARKS COPYRIGHTS INFRINGEMENT,
MISAPPROPRIATION..............................................62
SCHEDULE 2.17
ENVIRONMENTAL MATTERS.........................................71
SCHEDULE 2.18
EMPLOYEES.....................................................85
SCHEDULE 2.19
STAY AGREEMENTS...............................................87
SCHEDULE 2.20
EMPLOYEE BENEFIT PLANS........................................88
SCHEDULE 2.22
WARRANTIES....................................................97
SCHEDULE 2.25
OFFICERS AND DIRECTORS, BANK ACCOUNTS........................100
SCHEDULE 3.1
ORGANIZATION AND STANDING....................................115
SCHEDULE 3.2
AUTHORITY AND RESTRICTIONS...................................116
77
<PAGE>
SCHEDULE 3.6
CONSENTS.....................................................117
SCHEDULE 3.10
WJ FINANCIAL INFORMATION.....................................118
SCHEDULE 4.7
COMPENSATION OF TERMINATED EMPLOYEES.........................119
SCHEDULE 6.12(a)
PD FOREIGN EMPLOYEES.........................................120
SCHEDULE 6.12(d)(i) and (ii)
U.K. ACTUARIAL METHODS AND ASSUMPTIONS.......................121
SCHEDULE 6.13(a) and (b)
(a) ACTUARIAL ASSUMPTIONS FOR CONTINUED ACTIVE EMPLOYEES
(b) ACTUARIAL ASSUMPTIONS FOR NON-CONTINUED ACTIVE
PARTICIPANTS............................................122
78
<PAGE>
EXECUTION COPY
--------------
AMENDMENT NO. 1 TO AGREEMENT FOR PURCHASE AND SALE
BY AND BETWEEN WESLEY-JESSEN CORPORATION
AND PILKINGTON PLC
THIS AMENDMENT NO. 1 (this "Amendment") is made and entered into as of
---------
September 24, 1996, by and between Wesley-Jessen Corporation, a Delaware
corporation ("Purchaser"), and Pilkington plc, a company registered under the
---------
laws of England and Wales ("Seller"). This Amendment amends that certain
------
Agreement for Purchase and Sale dated as of July 5, 1996 (the "Purchase
--------
Agreement"), by and between Purchaser and Seller. Capitalized terms used and
- ---------
not defined herein shall have the meanings given to such terms in the Purchase
Agreement.
The parties hereto are entering into this Amendment to amend the Purchase
Agreement.
THEREFORE, the parties hereto hereby agree as follows:
Section 1. Amendments.
----------
1A. Purchase Price. Section 1.6 of the Purchase Agreement is
--------------
hereby amended and restated as follows:
1.6 Purchase Price. The aggregate purchase price to be paid by
---------------
Purchaser to Seller for the Acquired Stock and the Acquired
Assets (the "Purchase Price") is (i) Seventy-Three Million
Eight Hundred Seventy-Five Thousand and No/100 Dollars
($73,875,000), to be adjusted in accordance with
Sections 1.7 and 1.8 hereof; and (ii) the Assumed Liabilities,
------------ ---
and will be paid as provided below:
(a) At the Closing, Purchaser shall pay the amount of
Sixty-Eight Million Eight Hundred Seventy-Five Thousand and
No/100 Dollars ($68,875,000), to be adjusted in accordance with
Sections 1.7 and 1.8 hereof, by wire transfer in immediately
------------ ---
available funds to one or more bank account(s) designated by
Seller; and
(b) At the Closing, Purchaser shall deliver the executed
promissory note of Wesley-Jessen Holding, Inc., a Delaware
corporation ("WJ Holding") in the form of Exhibit A hereto (the
"Note"), in favor of Pilkington Holdings, Inc. in the amount of
Five Million and No/100 Dollars ($5,000,000)."
79
<PAGE>
1B. FTC Matters. Section 5.3 of the Purchase Agreement is hereby
-----------
amended and restated as follows:
"5.3 FTC Matters. WJ shall use its reasonable best efforts to
-----------
cause the Federal Trade Commission (the "FTC") to terminate the
waiting period under the Hart-Scott-Rodino Antitrust Improvement
Act of 1976, as amended (the "HSR Act"), by entering into an
Agreement Containing Consent Order ("Consent Order") on terms no
more restrictive than the draft Consent Order attached hereto as
Exhibit E. Seller and Purchaser shall use their reasonable best
---------
efforts to satisfy the FTC that the Consent Order is sufficient
to address any FTC antitrust concerns and that the waiting period
under the HSR Act should be terminated promptly."
1C. Pilkington Visioncare Pension Plan. Sections 6.13(d)(iii) and
----------------------------------
(iv) of the Purchase Agreement are amended by (i) deleting the first sentence of
Section 6.13(d)(iii) of the Purchase Agreement and replacing it with the
sentence "As of the Transfer Date, assets equal to the Pilkington Asset Amount
(as defined herein) minus $2 million (the "Transfer Amount") shall be
----------
transferred to the Successor Plan.", (ii) deleting the words "Pilkington Asset
Amount" in Section 6.13(d)(iv) of the Purchase Agreement and replacing such
deletion with the words "Transfer Amount" and (iii) adding the following new
paragraph at the end of Section 6.13(d)(iii) of the Purchase Agreement:
"If, in determining the Transfer Amount, the Pilkington Asset
Amount, as adjusted to comply with the requirements of Section
414(l) of the Code or as otherwise required by the PBGC, cannot
be reduced by $2 million and still satisfy the requirements of
Section 414(l) of the Code, Seller shall promptly pay to
Purchaser, in cash, an amount equal to (i) $2 million minus (ii)
-----
the amount that the actual transfer amount is less than the
Pilkington Asset Amount (not less than $0 nor in excess of
$2 million)."
1D. Closing. Section 9.1 of the Purchase Agreement is hereby amended
-------
by deleting the language "seventy-five (75)" and replacing it with "ninety-one
(91)".
IE. Termination. Section 11.15(a)(iii) of the Purchase Agreement is
-----------
hereby deleted and intentionally left blank. Section II.15(a)(iv) of the
Purchase Agreement is hereby amended by deleting the language "seventy-five
(75)" and replacing it with "ninety-one (91)".
IF. Schedule 1.9. Schedule 1.9 of the Purchase Agreement is amended
------------
and restated as set forth in Exhibit F attached hereto.
80
<PAGE>
Section 2. Effect. Except as amended by this Amendment, the Purchase
------
Agreement will remain in full force and effect. All references to the
"Agreement" in the Purchase Agreement shall hereafter be deemed to refer to the
Purchase Agreement as amended hereby.
Section 3. Counterparts. This Amendment may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
Section 4. Governing Law. The validity, construction, and enforceability
-------------
of this Amendment shall be governed in all respects by the laws of the State of
California, without regard to its conflict of laws rules.
* * * * *
81
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first above written.
PILKINGTON PLC
By: /s/ A.M. Ross
----------------------------
Name: A.M Ross
--------------------------
Title: Director
-------------------------
WESLEY-JESSEN CORPORATION
By: /s/ Adam Kirsch
----------------------------
Name: Adam Kirsch
--------------------------
Title: Director
-------------------------
82
<PAGE>
EXHIBIT 4.2
EXECUTION COPY
--------------
STOCKHOLDERS AGREEMENT
----------------------
THIS STOCKHOLDERS AGREEMENT (this "Agreement") is made and entered
---------
into as of October 22, 1996, by and among Wesley-Jessen Holding, Inc., a
Delaware corporation (the "Company"), BT Investment Partners, Inc. ("BT"), and
------- --
each of the Persons listed on Schedule I attached hereto (the "Bain Group") (BT
----------
and the members of the Bain Group are collectively referred to herein as the
"Stockholders," and each as a "Stockholder"). Unless otherwise indicated
- ------------- -----------
herein, capitalized terms used herein are defined in paragraph 6 hereof.
RECITALS
--------
The Company, as of the date hereof, is authorized by its Certificate
of Incorporation to issue capital stock consisting of 600,000 shares of its
Class L Common Stock, par value $.01 per share (the "Class L Common") and
--------------
5,400,000 shares of its Common Stock, par value $.01 per share ("Common"). The
------
Class L Common and the Common are collectively referred to herein as the "Common
------
Stock."
- -----
The parties hereto desire to enter into this Agreement to restrict the
sale, assignment, transfer, encumbrance or other disposition of the Common Stock
and to provide for certain rights and obligations in respect thereto as
hereinafter provided.
AGREEMENT
---------
NOW, THEREFORE, the parties to this Agreement hereby agree as follows:
1. Restrictions on Transfer of Stockholder Shares.
-----------------------------------------------
(a) Transfer of Stockholder Shares. No holder of Stockholder Shares
------------------------------
other than the Bain Group) may sell, transfer, assign, pledge or otherwise
directly or indirectly dispose of (a "Transfer") any interest in any
--------
Stockholder Shares, without the prior written consent of the holders of a
majority of the Bain Shares (the "Bain Holders"), except Transfers pursuant
------------
to and in accordance with paragraphs 1(b), 2 or 3 below.
(b) Participation Rights.
--------------------
(i) At least 30 days prior to any transfer of shares of any
class of Common Stock by any member of the Bain Group (other than a
transfer among the members of the Bain Group or their Affiliates or to
an employee of the Company or its Subsidiaries), the transferring
member of the Bain Group will deliver written notice (the "Sale
----
Notice") to the Company and all other holders of such class of Common
------
Stock that have been granted participation rights similar to the
participation rights granted herein (such holders of Common Stock with
participation rights collectively referred to as the "Other
-----
Stockholders"), specifying in reasonable detail
------------
<PAGE>
the identity of the prospective transferee(s) and the terms and conditions
of the transfer. Notwithstanding the restrictions contained in this
paragraph 1, the Other Stockholders may elect to participate in the
contemplated transfer by delivering written notice to the transferring
member of the Bain Group within 10 days after delivery of the Sale Notice.
If any Other Stockholders have elected to participate in such transfer,
each of the transferring member of the Bain Group and such Other
Stockholders will be entitled to sell in the contemplated transfer, at the
same price and on the same terms, a number of shares of such class of
Common Stock equal to the product of (A) the quotient determined by
dividing the number of shares of such class of Common Stock owned by such
person by the aggregate number of shares of such class of Common Stock
owned by the transferring member of the Bain Group and the Other
Stockholders participating in such sale and (B) the number of shares of
such class of Common Stock to be sold in the contemplated transfer.
Notwithstanding the foregoing, in the event that the transferring member(s)
of the Bain Group intend to transfer shares of more than one class of
Common Stock, the Other Stockholders participating in such transfer shall
be required to sell in the contemplated transfer a pro rata portion of
shares of all such classes of Common Stock (to the extent such Other
Stockholders own any shares of such other classes of Common Stock), which
portion shall be determined in the manner set forth immediately above.
For example (by way of illustration only), if the Sale Notice contemplated
-----------------------------------------
a sale of 100 shares of Common by the transferring member of the Bain
Group, and if the transferring member of the Bain Group at such time owns
30% of the Common and if one Other Stockholder elects to participate and
owns 20% of the Common, the transferring member of the Bain Group would be
entitled to sell 60 shares (30% / 50% x 100 shares) and the Other
Stockholder would be entitled to sell 40 shares (20% / 50% x 100 shares).
(ii) The transferring member of the Bain Group will use reasonable
efforts to obtain the agreement of the prospective transferee(s) to the
participation of the Other Stockholders in any contemplated transfer, and
the transferring member of the Bain Group will not transfer any of its
shares of Common Stock to the prospective transferee(s) unless (A)
simultaneously with such transfer, the prospective transferee or
transferees purchase from the Other Stockholders the shares of Common Stock
which the Other Stockholders are entitled to sell to such prospective
transferee(s) pursuant to paragraph 1(b)(i) above or (B) simultaneously
with such transfer, the transferring member of the Bain Group purchases (on
the same terms and conditions on which such shares were sold to the
transferee(s)) the number of shares of such class of Common Stock from the
Other Stockholders which the Other Stockholders would have been entitled to
sell pursuant to paragraph 1(b)(i) above.
(c) Permitted Transfers. The restrictions contained in paragraph 1(a) will
-------------------
not apply to (i) any Transfer of Stockholder Shares by any Stockholder among its
Affiliates, (ii) a Public Sale, (iii) an Approved Sale, (iv) a Transfer of
Stockholder Shares by any
-2-
<PAGE>
Stockholder pursuant to the laws of descent and distribution or among such
Stockholder's Family Group or (v) a Transfer pursuant to paragraph 1(b) above;
provided that the restrictions contained in this Agreement will continue to
apply to the Stockholder Shares after any Transfer pursuant to clauses (i), (iv)
or (v) above and the transferees of such Stockholder Shares shall agree in
writing to be bound by the provisions of this Agreement. Upon the Transfer of
Stockholder Shares pursuant to this subparagraph 1(c), the transferor will
deliver a written notice to the Company, which notice will disclose in
reasonable detail the identity of such transferee.
(d) Termination of Restrictions. The restrictions set forth in this
---------------------------
paragraph 1 will continue with respect to each Stockholder Share until the
earlier of (i) the date on which such Stockholder Share has been transferred in
a Public Sale, (ii) the consummation of an Approved Sale or (iii) the
consummation of a Public Offering (as defined in paragraph 3 hereof).
2. Sale of the Company.
-------------------
(a) If the Bain Holders approve (and, in the case of any sale or other
fundamental change which requires the approval of the board of directors of a
Delaware corporation pursuant to the Delaware General Corporation Law, the Board
shall have approved such sale) a sale of all or substantially all of the
Company's assets determined on a consolidated basis or a sale of all or
substantially all of the Company's outstanding capital stock (whether by merger,
recapitalization, consolidation, reorganization, combination or otherwise) to
any Independent Third Party or group of Independent Third Parties (collectively
an "Approved Sale"), each holder of Stockholder Shares will consent to and raise
-------------
no objections against such Approved Sale. If the Approved Sale is structured as
(i) a merger or consolidation, each holder of Stockholder Shares will waive any
dissenter's rights, appraisal rights or similar rights in connection with such
merger or consolidation or (ii) sale of stock, each holder of Stockholder Shares
will agree to sell all of its Stockholder Shares and rights to acquire
Stockholder Shares on the terms and conditions approved by the Board and the
Bain Holders. Each holder of Stockholder Shares will take all necessary or
desirable actions in connection with the consummation of the Approved Sale as
requested by the Company.
(b) The obligations of the holders of Common Stock with respect to an
Approved Sale are subject to the satisfaction of the following conditions: (i)
upon the consummation of the Approved Sale, each holder of Common Stock will
receive the same form of consideration and the same portion of the aggregate
consideration that such holders of Common Stock would have received if such
aggregate consideration had been distributed by the Company in complete
liquidation pursuant to the rights and preferences set forth in the Company's
Certificate of Incorporation as in effect immediately prior to such Approved
Sale; (ii) if any holders of a class of Common Stock are given an option as to
the form and amount of consideration to be received, each holder of such class
of Common Stock will be given the same option and (iii) each holder of then
currently exercisable rights to acquire shares of a class of Common Stock will
be given an opportunity to exercise such rights prior
-3-
<PAGE>
to the consummation of the Approved Sale and participate in such sale as
holders of such class of Common Stock.
(c) If the Company or the holders of the Company's securities enter
into any negotiation or transaction for which Rule 506 (or any similar rule
then in effect) promulgated by the Securities and Exchange Commission may
be available with respect to such negotiation or transaction (including a
merger, consolidation or other reorganization), the holders of Stockholder
Shares will, at the request of the Company, appoint a purchaser
representative (as such term is defined in Rule 501 promulgated by the
Securities and Exchange Commission) reasonably acceptable to the Company.
If any holder of Stockholder Shares appoints a purchaser representative
designated by the Company, the Company will pay the fees of such purchaser
representative, but if any holder of Stockholder Shares declines to appoint
the purchaser representative designated by the Company, such holder will
appoint another purchaser representative, and such holder will be
responsible for the fees of the purchaser representative so appointed.
(d) Holders of Stockholder Shares will bear their pro-rata share
(based upon the number of shares sold) of the costs of any sale of
Stockholder Shares pursuant to an Approved Sale to the extent such costs
are incurred for the benefit of all holders of Common Stock and are not
otherwise paid by the Company or the acquiring party. Costs incurred by
holders of Stockholder Shares on their own behalf will not be considered
costs of the transaction hereunder.
(e) The provisions of this paragraph Section 2 will terminate upon
completion of a Public Offering (as defined in paragraph 3 below).
3. Public Offering. If the Board and the holders of a majority of
---------------
the shares of Common Stock then outstanding approve an initial public offering
and sale of Common Stock (a "Public Offering") pursuant to an effective
---------------
registration statement under the Securities Act, the holders of Stockholder
Shares will take all necessary or desirable actions in connection with the
consummation of the Public Offering. If such Public Offering is an underwritten
offering and the managing underwriters advise the Company in writing that in
their opinion the Common Stock structure will adversely affect the marketability
of the offering, each holder of Stockholder Shares will consent to and vote for
a recapitalization, reorganization and/or exchange of the Common Stock into
securities that the managing underwriters, the Board and holders of a majority
of the shares of Common Stock then outstanding find acceptable and will take all
necessary or desirable actions in connection with the consummation of the
recapitalization, reorganization and/or exchange; provided that the resulting
securities reflect and are consistent with the rights and preferences set forth
in the Company's Certificate of Incorporation as in effect immediately prior to
such Public Offering..
4. Legend. Each certificate evidencing Stockholder Shares and each
------
certificate issued in exchange for or upon the transfer of any Stockholder
Shares (if such shares remain
-4-
<PAGE>
Stockholder Shares as defined herein after such Transfer) will be stamped or
otherwise imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
TRANSFER RESTRICTIONS PURSUANT TO A STOCKHOLDERS AGREEMENT DATED AS OF
OCTOBER __, 1996, BY AND AMONG THE ISSUER OF SUCH SECURITIES (THE
"COMPANY") AND CERTAIN OF THE COMPANY'S STOCKHOLDERS. A COPY OF SUCH
STOCKHOLDERS AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE COMPANY
TO THE HOLDER HEREOF UPON WRITTEN REQUEST."
The Company will imprint such legend on certificates evidencing Stockholder
Shares outstanding prior to the date hereof. The legend set forth above will be
removed from the certificates evidencing any shares which cease to be
Stockholder Shares in accordance with paragraph 6 hereof.
5. Transfer. Prior to Transferring any Stockholder Shares (other
--------
than in a Public Sale or in an Approved Sale) to any person or entity, the
transferring Stockholder will cause the prospective transferee to execute and
deliver to the Company and the other Stockholders a counterpart of this
Agreement.
6. Definitions.
-----------
"Affiliate" of a Stockholder means any other person, entity or
---------
investment fund controlling, controlled by or under common control with the
Stockholder and, in the case of a Stockholder which is a partnership, any
partner of the Stockholder.
"Bain Shares" means (i) any Common Stock purchased by the Bain Group
-----------
pursuant to that certain Stock Purchase Agreement dated as of June 28, 1995, by
and among the Company and the Bain Group (but excluding any Common Stock sold by
certain members of the Bain Group to BT as of the date hereof), (ii) any shares
of Common Stock otherwise acquired by the Bain Group and (iii) any equity
securities issued or issuable directly or indirectly with respect to the Common
Stock referred to in clauses (i) or (ii) by way of stock dividend or stock split
or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization.
"BT Shares" means (i) any Common Stock purchased by BT pursuant to
---------
that certain Stock Purchase Agreement dated as of the date hereof, (ii) any
shares of Common Stock otherwise acquired by BT and (iii) any equity securities
issued or issuable directly or indirectly with respect to the Common Stock
referred to in clauses (i) or (ii) by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization.
"Certificate of Incorporation" means the Company's certificate of
----------------------------
incorporation in effect at the time as of which any determination is being made.
-5-
<PAGE>
"Family Group" means a stockholder's spouse and descendants (whether
------------
or not adopted) and any trust solely for the benefit of the Stockholder and/or
the Stockholder's spouse and/or descendants.
"Independent Third Party" means any Person who, immediately prior to
-----------------------
the contemplated transaction, does not own in excess of 10% of the Company's
Common Stock on a fully-diluted basis (a "10% Owner"), who is not controlling,
---------
controlled by or under common control with any such 10% Owner and who is not the
spouse or descendant (by birth or adoption) of any such 10% Owner or a trust for
the benefit of such 10% Owner and/or such other Persons.
"Person" means an individual, a partnership, a corporation, an
------
association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political
subdivision thereof.
"Public Sale" means any sale of Stockholder Shares to the public
-----------
pursuant to an offering registered under the Securities Act or to the public
through a broker, dealer or market maker pursuant to the provisions of Rule 144
adopted under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended from
--------------
time to time.
"Securities and Exchange Commission" includes any governmental body
----------------------------------
or agency succeeding to the functions thereof.
"Stockholder Shares" means the Bain Shares and the BT Shares. As to
------------------
any particular shares constituting Stockholder Shares, such shares will cease to
be Stockholder Shares when they have been (x) effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering them, or (y) sold to the public through a broker, dealer or market
maker pursuant to Rule 144 (or by similar provision then in force) under the
Securities Act.
"Subsidiary" means with respect to any Person, any corporation,
----------
partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors is at
the time owned or controlled, directly or indirectly, by that Person or one or
more of the other Subsidiaries of that Person or a combination thereof, or (ii)
if a partnership, association or other business entity, a majority of the
partnership or other similar ownership interest thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more Subsidiaries of
that Person or a combination thereof. For purposes hereof, a Person or Persons
shall be deemed to have a majority ownership interest in a partnership,
association or other business entity if such Person or Persons shall be
allocated a majority of partnership, association or other business entity gains
or losses or shall be or control the managing director or general partner of
such partnership, association or business entity.
7. Transfers in Violation of Agreement. Any Transfer or attempted
-----------------------------------
Transfer of any Stockholder Shares in violation of any provision of this
Agreement will be void, and the
-6-
<PAGE>
Company will not record such Transfer on its books or treat any purported
transferee of such Stockholder Shares as the owner of such shares for any
purpose.
8. Covenants. The Company will deliver to each holder of at least
---------
3% of the Stockholder Shares, the quarterly and annual financial statements
required to be furnished pursuant to Section 7.01(b) and (c) of that certain
Credit Agreement dated as of October 2, 1996, by and among the Company, Wesley-
Jessen Corporation, various lending institutions, and Bankers Trust Company, as
agent, as the same may be amended, modified or restated from time to time (the
"Credit Agreement") . Notwithstanding any termination of the Credit Agreement,
- -----------------
this obligation will continue until the earlier of the consummation of (i) an
Approved Sale and (ii) a Public Offering.
9. Issuances at Fair Market Value. The Company hereby agrees that
------------------------------
it will not issue any shares of its capital stock at a price per share which is
less than the fair market value thereof (as determined in good faith by the
Board of Directors of the Company), other than shares of capital stock issued,
sold or offered (i) to employees, directors or consultants of the Company or its
Subsidiaries (excluding Bain Capital, Inc., its employees and its Affiliates),
(ii) as consideration (in whole or in part) for an acquisition consummated after
the date hereof, (iii) to each of the Company's then existing stockholders, on a
pro rata basis or (iv) upon the exercise or conversion of any securities
outstanding on the date hereof or issued after the date hereof in accordance
with the provisions of this paragraph 9. The restrictions set forth in this
paragraph 9 will terminate upon the earlier of the consummation of an Approved
Sale or the consummation of a Public Offering.
10. Amendment and Waiver. Except as otherwise provided herein, no
--------------------
modification, amendment or waiver of any provision of this Agreement will be
effective against the Company or the Stockholders unless such modification,
amendment or waiver is approved in writing by the Company and the holders of at
least a majority of the then outstanding Stockholder Shares; provided that if
such amendment or waiver would adversely affect a holder or group of holders of
Stockholder Shares in a manner different than any other holders of Stockholder
Shares, then such amendment or waiver will require the consent of such holder of
Stockholder Shares or a majority of the Stockholder Shares held by such group of
holders adversely affected. The failure of any party to enforce any of the
provisions of this Agreement will in no way be construed as a waiver of such
provisions and will not affect the right of such party thereafter to enforce
each and every provision of this Agreement in accordance with its terms.
11. Severability. Whenever possible, each provision of this
------------
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
12. Entire Agreement. Except as otherwise expressly set forth
----------------
herein, this document, and that certain Amended and Restated Registration
Agreement dated as of the date hereof between the Company and certain of its
stockholders embody the complete agreement and
-7-
<PAGE>
understanding among the parties hereto with respect to the subject matter hereof
and supersede and preempt any prior understandings, agreements or
representations by or among the parties, written or oral, which may have related
to the subject matter hereof in any way.
13. Successors and Assigns. Except as otherwise provided herein,
----------------------
this Agreement will bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Stockholders and any subsequent
holders of Stockholder Shares and the respective successors and assigns of each
of them, so long as they hold Stockholder Shares.
14. Counterparts. This Agreement may be executed in separate
------------
counterparts each of which will be an original and all of which taken together
will constitute one and the same agreement.
15. Remedies. The parties hereto agree and acknowledge that money
--------
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that the Company and each Stockholder will have the right to
injunctive relief, in addition to all of its rights and remedies at law or in
equity, to enforce the provisions of this Agreement. Nothing contained in this
Agreement will be construed to confer upon any Person who is not a signatory
hereto any rights or benefits, as a third party beneficiary or otherwise.
16. Notices. Any notice provided for in this Agreement will be in
-------
writing and will be either personally delivered, or received by certified mail,
return receipt requested, or sent by reputable overnight courier service
(charges prepaid) to the Company at the address set forth below and to any other
recipient and to any subsequent holder of Stockholder Shares subject to this
Agreement at such address as indicated by the Company's records, or at such
address or to the attention of such other person as the recipient party has
specified by prior written notice to the sending party. Notices will be deemed
to have been given hereunder when delivered personally, three days after deposit
in the U.S. mail and one day after deposit with a reputable overnight courier
service. The Company's address is:
To the Company:
--------------
Wesley-Jessen Holding, Inc.
c/o Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Attention: Stephen G. Pagliuca
Adam W. Kirsch
John W. Maki
-8-
<PAGE>
With a copy to:
--------------
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Jeffrey C. Hammes
Gary M. Holihan
17. Governing Law. The corporate law of the State of Delaware shall
-------------
govern all questions concerning the relative rights of the Company and its
stockholders. All other issues concerning the enforceability, validity and
binding effect of this Agreement will be governed by and construed in accordance
with the laws of the State of Illinois, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of Illinois or
any other jurisdiction) that would cause the application of the law of any
jurisdiction other than the State of Illinois.
18. Descriptive Headings. The descriptive headings of this Agreement
--------------------
are inserted for convenience only and do not constitute a part of this
Agreement.
* * * * *
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Stockholders
Agreement on the day and year first above written.
WESLEY-JESSEN HOLDING, INC.
By: /s/ Adam Kirsch
------------------------------
Its: /s/ Executive Vice President
------------------------------
BT INVESTMENT PARTNERS, INC.
By: /s/ Joseph F. Wood
------------------------------
Its:/s/ Joseph F. Wood
------------------------------
BAIN CAPITAL FUND IV, L.P.
By: Bain Capital Partners IV, L.P.
Its: General Partner
By: Bain Capital Investors, Inc.
Its: General Partner
By: /s/ Adam Kirsch
------------------------------
A Managing Director
BAIN CAPITAL FUND IV-B, L.P.
By: Bain Capital Partners IV, L.P.
Its: General Partner
By: Bain Capital Investors, Inc.
Its: General Partner
By: /s/ Adam Kirsch
------------------------------
A Managing Director
<PAGE>
BCIP ASSOCIATES
By: /s/ Adam Kirsch
------------------------------
A General Partner
BCIP TRUST ASSOCIATES, L.P.
By: /s/ Adam Kirsch
------------------------------
A General Partner
RANDOLPH STREET PARTNERS
By: /s/ Jeffery C. Hommes
------------------------------
A General Partner
/s/ Robert A. Sandler
------------------------------
Robert Sandler
<PAGE>
SCHEDULE I
The Bain Group
--------------
Bain Capital Fund IV, L.P.
Bain Capital Fund IV-B, L.P.
BCIP Associates
BCIP Trust Associates, L.P.
Randolph Street Partners
Robert Sandler
<PAGE>
Exhibit 4.3
EXECUTION COPY
--------------
AMENDED AND RESTATED REGISTRATION AGREEMENT
-------------------------------------------
THIS AMENDED AND RESTATED REGISTRATION AGREEMENT (this "Agreement") is
---------
made and entered into as of October 22, 1996, by and among Wesley-Jessen
Holding, Inc., a Delaware corporation (the "Company"), BT Investment Partners,
-------
Inc. ("BT"), and each of the Persons listed on Schedule I attached hereto (the
--
"Bain Stockholders") (BT and the Bain Stockholders are collectively referred to
- ------------------
herein as the "Stockholders," and each as a "Stockholder"). This Agreement
------------ -----------
amends, restates and replaces that certain Registration Agreement dated as of
June 28, 1995, by and between the Company and certain of its stockholders.
The Company and the Bain Stockholders are parties to a Stock Purchase
Agreement dated as of June 28, 1995 (the "Original Purchase Agreement"). BT and
---------------------------
certain of the Company's stockholders are parties to a Stock Purchase Agreement
of even date herewith (the "New Purchase Agreement"). In connection with the
----------------------
New Purchase Agreement, the Company has agreed to provide the registration
rights set forth in this Agreement. Unless otherwise provided in this
Agreement, capitalized terms used herein shall have the meanings set forth in
paragraph 9 hereof.
The parties hereto agree as follows:
1. Demand Registrations.
--------------------
(a) Requests for Registration. At any time, the holders of a majority
-------------------------
of the Bain Registrable Securities may request registration under the Securities
Act of all or part of their Registrable Securities on Form S-1 or any similar
long-form registration ("Long-Form Registrations") or, if available, on Form S-2
-----------------------
or S-3 or any similar short-form registration ("Short-Form Registrations").
------------------------
Each request for a Demand Registration shall specify the approximate number of
Registrable Securities requested to be registered and the anticipated per share
price range for such offering. Within ten days after receipt of any such
request, the Company shall give written notice of such requested registration to
all other holders of Registrable Securities and, subject to paragraph 1(d)
below, will include in such registration all Registrable Securities with respect
to which the Company has received written requests for inclusion therein within
15 days after the receipt of the Company's notice. All registrations requested
pursuant to this paragraph 1(a) are referred to herein as "Demand
------
Registrations."
- -------------
(b) Long-Form Registrations. The holders of a majority of the Bain
-----------------------
Registrable Securities will be entitled to request unlimited Long-Form
Registrations in which the Company will pay all Registration Expenses. The
Company will pay all Registration Expenses in connection with any registration
initiated as a Long-Form Registration whether or not it has become effective.
All Long-Form Registrations shall be underwritten registrations.
(c) Short-Form Registrations. In addition to the Long-Form
------------------------
Registrations provided pursuant to paragraph 1(b), the holders of a majority of
the Bain Registrable Securities will be entitled to request unlimited Short-Form
Registrations in which the Company will pay all
<PAGE>
Registration Expenses. Demand Registrations will be Short-Form Registrations
whenever the Company is permitted to use any applicable short form. After the
Company has become subject to the reporting requirements of the Securities
Exchange Act, the Company will use its best efforts to make Short-Form
Registrations available for the sale of Registrable Securities.
(d) Priority on Demand Registrations. The Company will not include in
--------------------------------
any Demand Registration any securities which are not Registrable Securities
without the prior written consent of the holders of a majority of the
Registrable Securities. If a Demand Registration is an underwritten offering
and the managing underwriters advise the Company in writing that in their
opinion the number of Registrable Securities and, if permitted hereunder, other
securities requested to be included in such offering exceeds the number of
Registrable Securities and other securities, if any, which can be sold therein
without adversely affecting the marketability of the offering, the Company will
include in such registration prior to the inclusion of any securities which are
not Registrable Securities the number of Registrable Securities requested to be
included which in the opinion of such underwriters can be sold without adversely
affecting the marketability of the offering, pro rata among the respective
holders thereof on the basis of the number of shares of Registrable Securities
owned by each such holder.
(e) Restrictions on Demand Registrations. The Company will not be
------------------------------------
obligated to effect any Demand Registration within six months after the
effective date of a previous Demand Registration. The Company may postpone for
up to six months the filing or the effectiveness of a registration statement for
a Demand Registration if the Company and the holders of at least a majority of
the Registrable Securities agree that such Demand Registration would reasonably
be expected to have an adverse effect on any proposal or plan by the Company or
any of its Subsidiaries to engage in any acquisition of assets (other than in
the ordinary course of business) or any merger, consolidation, tender offer or
similar transaction; provided that in such event, the holders of a majority of
Registrable Securities requesting such Demand Registration will be entitled to
withdraw such request and, if such request is withdrawn, such Demand
Registration will not count as one of the permitted Demand Registrations
hereunder and the Company will pay all Registration Expenses in connection with
such registration.
(f) Selection of Underwriters. The holders of a majority of the Bain
-------------------------
Registrable Securities included in any Demand Registration will have the right
to select the investment banker(s) and manager(s) to administer the offering,
subject to the Company's approval, which will not be unreasonably withheld.
(g) Other Registration Rights. Except as provided in this Agreement,
-------------------------
the Company will not grant to any Persons the right to request the Company to
register any equity securities of the Company, or any securities convertible or
exchangeable into or exercisable for such securities, without the prior written
consent of the holders of a majority of the Registrable Securities.
2. Piggyback Registrations.
-----------------------
(a) Right to Piggyback. Whenever the Company proposes to register any
------------------
of its securities (including any proposed registration of the Company's
securities by any third party) under
-2-
<PAGE>
the Securities Act (other than pursuant to a Demand Registration or a
registration on Form S-4 or S-8 or any successor or similar forms) and the
registration form to be used may be used for the registration of Registrable
Securities (a "Piggyback Registration"), whether or not for sale for its
----------------------
own account, the Company will give prompt written notice to all holders of
Registrable Securities of its intention to effect such a registration and will
include in such registration all Registrable Securities with respect to which
the Company has received written requests for inclusion therein within 30 days
after the receipt of the Company's notice.
(b) Piggyback Expenses. The Registration Expenses of the holders of
------------------
Registrable Securities will be paid by the Company in all Piggyback
Registrations.
(c) Priority on Primary Registrations. If a Piggyback Registration is
---------------------------------
an underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company in writing (with a copy to each party hereto
requesting registration of Registrable Securities) that in their opinion the
number of securities requested to be included in such registration exceeds the
number which can be sold in such offering without adversely affecting the
marketability of such offering, the Company will include in such registration
(i) first, the securities the Company proposes to sell, (ii) second, the
Registrable Securities requested to be included in such registration, pro rata
among the holders of such Registrable Securities on the basis of the number of
shares owned by each such holder and (iii) third, other securities requested to
be included in such registration.
(d) Priority on Secondary Registrations. If a Piggyback Registration
-----------------------------------
is an underwritten secondary registration on behalf of holders of the Company's
securities, and the managing underwriters advise the Company in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering without
adversely affecting the marketability of the offering, the Company will include
in such registration (i) first, the securities requested to be included therein
by the holders requesting such registration and the Registrable Securities
requested to be included in such registration, pro rata among the holders of
such securities on the basis of the number of shares owned by each such holder
and (ii) second, other securities requested to be included in such registration.
(e) Other Registrations. If the Company has previously filed a
-------------------
registration statement with respect to Registrable Securities pursuant to
paragraph 1 or pursuant to this paragraph 2, and if such previous registration
has not been withdrawn or abandoned, the Company will not file or cause to be
effected any other registration of any of its equity securities or securities
convertible or exchangeable into or exercisable for its equity securities under
the Securities Act (except on Form S-4 or S-8 or any successor form), whether on
its own behalf or at the request of any holder or holders of such securities,
until a period of at least six months has elapsed from the effective date of
such previous registration.
3. Holdback Agreements.
-------------------
(a) To the extent not inconsistent with applicable law, each holder of
Registrable Securities agrees not to effect any public sale or distribution
(including sales pursuant to Rule 144) of equity securities of the Company, or
any securities, options or rights convertible into or
-3-
<PAGE>
exchangeable or exercisable for such securities, during the seven days prior to
and the 180-day period beginning on the effective date of any underwritten
Demand Registration or any underwritten Piggyback Registration (except as part
of such underwritten registration), unless the underwriters managing the
registered public offering otherwise agree.
(b) The Company agrees (i) not to effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and during the 180-day period beginning on the effective date of any
underwritten Demand Registration or any underwritten Piggyback Registration
(except as part of such underwritten registration or pursuant to registrations
on Form S-4 or S-8 or any successor form), unless the underwriters managing the
registered public offering otherwise agree, and (ii) to cause each holder of its
Common Stock, or any securities convertible into or exchangeable or exercisable
for Common Stock, purchased from the Company at any time after the date of this
Agreement (other than in a registered public offering) to agree not to effect
any public sale or distribution (including sales pursuant to Rule 144) of any
such securities during such period (except as part of such underwritten
registration, if otherwise permitted), unless the underwriters managing the
registered public offering otherwise agree.
4. Registration Procedures. Whenever the holders of Registrable
-----------------------
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, the Company will use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof (including the registration of Common and
Class L Common held by a holder of Registrable Securities requesting
registration as to which the Company has received reasonable assurances that
only Registrable Securities will be distributed to the public), and pursuant
thereto the Company will as expeditiously as possible:
(a) prepare and (within 60 days after the end of the period within
which requests for registration may be given to the Company) file with the
Securities and Exchange Commission a registration statement with respect to such
Registrable Securities and thereafter use its best efforts to cause such
registration statement to become effective (provided that before filing a
registration statement or prospectus or any amendments or supplements thereto,
the Company will furnish to the counsel selected by the holders of a majority of
the Registrable Securities covered by such registration statement copies of all
such documents proposed to be filed, which documents will be subject to review
of such counsel);
(b) prepare and file with the Securities and Exchange Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective for a period of either (i) not less than six months (subject
to extension pursuant to paragraph 7(b)) or, if such registration statement
relates to an underwritten offering, such longer period as in the opinion of
counsel for the underwriters a prospectus is required by law to be delivered in
connection with sales of Registrable Securities by an underwriter or dealer or
(ii) such shorter period as will terminate when all of the securities covered by
such registration statement have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth in
such registration statement (but in any event not before the expiration of any
longer period required under the Securities Act),
-4-
<PAGE>
and to comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement until such
time as all of such securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth in
such registration statement;
(c) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any seller reasonably requests and do any and all other acts and things which
may be reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller (provided that the Company will not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this subparagraph (d), (ii) subject itself to taxation in any
such jurisdiction or (iii) consent to general service of process in any such
jurisdiction);
(e) notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, upon discovery that, or upon the discovery of the happening of
any event as a result of which, the prospectus included in such registration
statement contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, and, at the request of any such
seller, the Company will prepare and furnish to such seller a reasonable number
of copies of a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus will
not contain an untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the NASD automated quotation
system;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities (including, without limitation, effecting a stock split
or a combination of shares);
-5-
<PAGE>
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(j) otherwise use its best efforts to comply with all applicable rules
and regulations of the Securities and Exchange Commission, and make available to
its security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months beginning with the first day of
the Company's first full calendar quarter after the effective date of the
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder;
(k) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any Securities included in such registration statement for sale in any
jurisdiction, the Company will use its reasonable best efforts promptly to
obtain the withdrawal of such order;
(l) obtain one or more comfort letters, dated the effective date of
such registration statement (and, if such registration includes an underwritten
public offering, dated the date of the closing under the underwriting
agreement), signed by the Company's independent public accountants in customary
form and covering such matters of the type customarily covered by comfort
letters as the holders of a majority of the Registrable Securities being sold
reasonably request (so long as such Registrable Securities constitute at least
10% of the securities covered by such registration statement); and
(m) provide a legal opinion of the Company's outside counsel, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, dated the date of the closing under
the underwriting agreement), with respect to the registration statement, each
amendment and supplement thereto, the prospectus included therein (including the
preliminary prospectus) and such other documents relating thereto in customary
form and covering such matters of the type customarily covered by legal opinions
of such nature.
The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such seller and the distribution of such securities as the Company may from time
to time reasonably request in writing.
5. Registration Expenses.
---------------------
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including, without limitation, all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses,
-6-
<PAGE>
and fees and disbursements of counsel for the Company and all independent
certified public accountants, underwriters (excluding discounts and commissions)
and other Persons retained by the Company (all such expenses being herein called
"Registration Expenses"), will be borne as provided in this Agreement, except
---------------------
that the Company will, in any event, pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit or
quarterly review, the expense of any liability insurance and the expenses and
fees for listing the securities to be registered on each securities exchange on
which similar securities issued by the Company are then listed or on the NASD
automated quotation system.
(b) In connection with each Demand Registration and each Piggyback
Registration, the Company will reimburse the holders of Registrable Securities
covered by such registration for the reasonable fees and disbursements of one
counsel chosen by the holders of a majority of the Registrable Securities
included in such registration.
(c) To the extent Registration Expenses are not required to be paid by
the Company, each holder of securities included in any registration hereunder
will pay those Registration Expenses allocable to the registration of such
holder's securities so included, and any Registration Expenses not so allocable
will be borne by all sellers of securities included in such registration in
proportion to the aggregate selling price of the securities to be so registered
for each seller.
6. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless, to the extent
permitted by law, each holder of Registrable Securities, its officers and
directors and each Person that controls such holder (within the meaning of the
Securities Act) against any losses, claims, damages, liabilities, joint or
several, to which such holder or any such director or officer or controlling
person may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon (i)
any untrue or alleged untrue statement of material fact contained (A) in any
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or (B) in any application or other document or
communication (in this paragraph 6 collectively called an "application")
executed by or on behalf of the Company or based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in order to
qualify any securities covered by such registration statement under the "blue
sky" or securities laws thereof, or (ii) any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and the Company will reimburse such holder and each such
director, officer and controlling person for any legal or any other expenses
incurred by them in connection with investigating or defending any such loss,
claim, liability, action or proceeding; provided that the Company will not be
liable in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
or is based upon an untrue statement or alleged untrue statement, or omission or
alleged omission, made in such registration statement, any such prospectus or
preliminary prospectus or any amendment or supplement thereto, or in any
application, in reliance upon, and in conformity with,
-7-
<PAGE>
written information prepared and furnished to the Company by such holder
expressly for use therein or by such holder's failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements thereto
after the Company has furnished such holder with a sufficient number of copies
of the same. In connection with an underwritten offering, the Company will
indemnify such underwriters, their officers and directors and each Person that
controls such underwriters (within the meaning of the Securities Act) to the
same extent as provided above with respect to the indemnification of the holders
of Registrable Securities.
(b) In connection with any registration statement in which a holder of
Registrable Securities is participating, each such holder will furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, will indemnify and hold harmless
the Company, its directors and officers and each other Person who controls the
Company (within the meaning of the Securities Act) against any losses, claims,
damages, liabilities, joint or several, to which such holder or any such
director or officer or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon (i) any untrue or alleged untrue
statement of material fact contained in the registration statement, prospectus
or preliminary prospectus or any amendment thereof or supplement thereto or in
any application or (ii) any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or omission is
made in such registration statement, any such prospectus or preliminary
prospectus or any amendment or supplement thereto, or in any application, in
reliance upon and in conformity with written information prepared and furnished
to the Company by such holder expressly for use therein, and such holder will
reimburse the Company and each such director, officer and controlling Person for
any legal or any other expenses incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; provided that the obligation to indemnify will be individual to each
holder and will be limited to the net amount of proceeds received by such holder
from the sale of Registrable Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
-8-
<PAGE>
(d) The indemnification provided for under this Agreement will remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and will survive the transfer of securities. The Company also
agrees to make such provisions, as are reasonably requested by any indemnified
party, for contribution to such party in the event the Company's indemnification
is unavailable for any reason.
7. Participation in Underwritten Registrations.
-------------------------------------------
(a) No Person may participate in any registration hereunder which is
underwritten unless such Person (i) agrees to sell such Person's securities on
the basis provided in any underwriting arrangements approved by the Person or
Persons entitled hereunder to approve such arrangements (including, without
limitation, pursuant to the terms of any over-allotment or "green shoe" option
requested by the managing underwriter(s), provided that no holder of Registrable
Securities will be required to sell more than the number of Registrable
Securities that such holder has requested the Company to include in any
registration) and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
(b) Each Person that is participating in any registration hereunder
agrees that, upon receipt of any notice from the Company of the happening of any
event of the kind described in paragraph 4(e) above, such Person will forthwith
discontinue the disposition of its Registrable Securities pursuant to the
registration statement until such Person's receipt of the copies of a
supplemented or amended prospectus as contemplated by such paragraph 4(e). If
the Company gives any such notice, the applicable time period mentioned in
paragraph 4(b) during which a Registration Statement is to remain effective will
be extended by the number of days during the period from and including the date
of the giving of such notice pursuant to this paragraph to and including the
date when each seller of a Registrable Security covered by such registration
statement has received the copies of the supplemented or amended prospectus
contemplated by paragraph 4(e).
8. Current Public Information. At all times after the Company has
--------------------------
filed a registration statement with the Securities and Exchange Commission
pursuant to the requirements of either the Securities Act or the Securities
Exchange Act, the Company will file all reports required to be filed by it under
the Securities Act and the Securities Exchange Act and the rules and regulations
adopted by the Securities and Exchange Commission thereunder, and will take such
further action as any holder or holders of Registrable Securities may reasonably
request, all to the extent required to enable such holders to sell Registrable
Securities pursuant to Rule 144 adopted by the Securities and Exchange
Commission under the Securities Act (as such rule may be amended from time to
time) or any similar rule or regulation hereafter adopted by the Securities and
Exchange Commission.
9. Definitions.
-----------
"Bain Registrable Securities" means (i) any shares of Common Stock
---------------------------
issued to the Bain Stockholders pursuant to the Original Purchase Agreement (but
excluding those shares of
-9-
<PAGE>
Common Stock sold by the Bain Stockholders to BT pursuant to the New Purchase
Agreement), (ii) any equity securities issued or issuable directly or indirectly
with respect to the securities referred to in clause (i) by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization, including a
recapitalization or exchange and (iii) any other shares of Common Stock held by
Persons holding securities described in clause (i) or (ii) above; provided that
in the event that pursuant to such recapitalization or exchange, equity
securities are issued which do not participate in the residual equity of the
Company ("Non-Participating Securities"), such Non-Participating Securities will
----------------------------
not be Registrable Securities. As to any particular shares constituting Bain
Registrable Securities, such shares will cease to be Bain Registrable Securities
when they have been (x) effectively registered under the Securities Act and
disposed of in accordance with the registration statement covering them, or (y)
sold to the public through a broker, dealer or market maker pursuant to Rule 144
(or by similar provision then in force) under the Securities Act.
"BT Registrable Securities" means (i) any shares of Common Stock
-------------------------
acquired by BT pursuant to the New Purchase Agreement, (ii) any equity
securities issued or issuable directly or indirectly with respect to the
securities referred to in clause (i) by way of stock dividend or stock split or
in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization, including a recapitalization or exchange
and (iii) any other shares of Common Stock held by Persons holding securities
described in clause (i) or (ii) above; provided that in the event that pursuant
to such recapitalization or exchange, Non-Participating Securities are issued,
such Non-Participating Securities will not be Registrable Securities. As to any
particular shares constituting BT Registrable Securities, such shares will cease
to be BT Registrable Securities when they have been (x) effectively registered
under the Securities Act and disposed of in accordance with the registration
statement covering them, or (y) sold to the public through a broker, dealer or
market maker pursuant to Rule 144 (or by similar provision then in force) under
the Securities Act.
"Class L Common" means the Class L Common Stock, par value $.01 per
--------------
share, of the Company.
"Common" means the Common Stock, par value $.01 per share, of the
------
Company.
"Common Stock" means both Class L Common and Common.
------------
"Person" means an individual, a partnership, a joint venture, a
------
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
"Registrable Securities" means collectively the Bain Registrable
----------------------
Securities and the BT Registrable Securities. For purposes of this Agreement, a
Person will be deemed to be a holder of Registrable Securities whenever such
Person has the right to acquire such Registrable Securities (upon conversion or
exercise in connection with a transfer of securities or otherwise, but
disregarding any restrictions or limitations upon the exercise of such right),
whether or not such acquisition has actually been effected.
-10-
<PAGE>
"Securities Act" means the Securities Act of 1933, as amended, or any
--------------
similar federal law then in force.
"Securities and Exchange Commission" includes any governmental body or
----------------------------------
agency succeeding to the functions thereof.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
-----------------------
as amended, or any similar federal law then in force.
Unless otherwise stated, other capitalized terms contained herein have
the meanings set forth in the New Purchase Agreement.
10. Miscellaneous.
-------------
(a) No Inconsistent Agreements. The Company will not hereafter enter
--------------------------
into any agreement with respect to its securities which is inconsistent with or
violates the rights granted to the holders of Registrable Securities in this
Agreement.
(b) Adjustments Affecting Registrable Securities. The Company will
--------------------------------------------
not take any action, or permit any change to occur, with respect to its
securities which would materially and adversely affect the ability of the
holders of Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement or which would adversely
affect the marketability of such Registrable Securities in any such registration
(including, without limitation, effecting a stock split or a combination of
shares).
(c) Remedies. The parties hereto agree and acknowledge that money
--------
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party hereto will have the right to injunctive relief, in
addition to all of its other rights and remedies at law or in equity, to enforce
the provisions of this Agreement.
(d) Amendments and Waivers. Except as otherwise provided herein, the
----------------------
provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company and holders of a majority of the Registrable
Securities; but if such amendment or waiver would treat a holder or group of
holders of Registrable Securities in a manner different from any other holders
of Registrable Securities, then such amendment or waiver will require the
consent of such holder or the holders of a majority of the Registrable
Securities of such group adversely treated.
(e) Successors and Assigns. This Agreement will be binding upon and
----------------------
inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns. In addition, and whether or not any express
assignment has been made, the provisions of this Agreement that are for the
benefit of the holders of Registrable Securities (or any portion thereof) as
such will be for the benefit of and enforceable by any subsequent holder of any
Registrable Securities (or of such portion thereof), subject to the provisions
respecting the minimum numbers or percentages of shares of Registrable
Securities (or of such portion thereof) required in order to be entitled to
certain rights, or take certain actions, contained herein.
-11-
<PAGE>
(f) Severability. Whenever possible, each provision of this Agreement
------------
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
(g) Counterparts. This Agreement may be executed simultaneously in
------------
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together will constitute
one and the same Agreement.
(h) Descriptive Headings. The descriptive headings of this Agreement
--------------------
are inserted for convenience only and do not constitute a part of this
Agreement.
(i) Governing Law. The corporate law of the State of Delaware shall
-------------
govern all questions concerning the relative rights of the Company and its
stockholders. All other issues concerning the enforceability, validity and
binding effect of this Agreement will be governed by and construed in accordance
with the laws of the State of Illinois, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of Illinois or
any other jurisdiction) that would cause the application of the law of any
jurisdiction other than the State of Illinois.
(j) Notices. All notices, demands or other communications to be given
-------
or delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when personally delivered or
received by certified mail, return receipt requested, or sent by guaranteed
overnight courier service. Such notices, demands and other communications will
be sent to the Stockholders at the addresses indicated in the Company's records
and to the Company at the address indicated below:
To the Company:
--------------
Wesley-Jessen Holding, Inc.
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Attention: Stephen G. Pagliuca
Adam W. Kirsch
John W. Maki
-12-
<PAGE>
With a copy to:
--------------
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Jeffrey C. Hammes
Gary M. Holihan
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
* * * * *
-13-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration Agreement on
the day and year first above written.
WESLEY-JESSEN HOLDINGS INC.
By: Adam Kirsch
------------------------------------
Its: Executive Vice President
-----------------------------------
BAIN CAPITAL FUND IV, L.P.
By: Bain Capital Partners IV, L.P.
Its: General Partner
By: Bain Capital Investors, Inc.
Its: General Partner
By: Adam Kirsch
------------------------------------
A Managing Director
BAIN CAPITAL FUND IV-B, L.P.
By: Bain Capital Partners IV, L.P.
Its: General Partner
By: Bain Capital Investors, Inc.
Its: General Partner
By: Adam Kirsch
------------------------------------
A Managing Director
BCIP ASSOCIATES
By: Adam Kirsch
------------------------------------
A General Partner
<PAGE>
BCIP TRUST ASSOCIATES, L.P.
By:/s/ Adam Kirsch
------------------------------------
A General Partner
RANDOLPH STREET PARTNERS
By:/s/ Jeffrey C. Hommes
------------------------------------
A General Partner
/s/ Robert A. Sandler
---------------------------------------
Robert Sandler
BT INVESTMENT PARTNERS INC.
By: /s/ Joseph F. Wood
------------------------------------
Its: /s/ Joseph F. Wood
-----------------------------------
<PAGE>
Schedule I
----------
Bain Capital Fund IV, L.P.
Bain Capital Fund IV-B, L.P.
BCIP Associates
BCIP Trust Associates, L.P.
Randolph Street Partners
Robert Sandler
<PAGE>
EXHIBIT 4.4
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
among
WESLEY-JESSEN HOLDING, INC.,
WESLEY-JESSEN CORPORATION,
VARIOUS LENDING INSTITUTIONS,
and
BANKERS TRUST COMPANY,
AS AGENT
--------------------------------
Dated as of October 2, 1996
--------------------------------
$140,000,000
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
SECTION 1. Amount and Terms of Credit...................................... 1
1.01 Commitments..................................................... 1
1.02 Minimum Borrowing Amounts, etc.................................. 4
1.03 Notice of Borrowing............................................. 4
1.04 Disbursement of Funds........................................... 5
1.05 Notes........................................................... 6
1.06 Conversions..................................................... 7
1.07 Pro Rata Borrowings............................................. 8
1.08 Interest........................................................ 8
1.09 Interest Periods................................................ 9
1.10 Increased Costs, Illegality, etc................................ 10
1.11 Compensation.................................................... 12
1.12 Change of Lending Office........................................ 13
1.13 Replacement of Banks............................................ 13
SECTION 2. Letters of Credit............................................... 14
2.01 Letters of Credit............................................... 14
2.02 Letter of Credit Requests;
Notices of Issuance............................................. 16
2.03 Agreement to Repay Letter
of Credit Payments.............................................. 16
2.04 Letter of Credit
Participations.................................................. 17
2.05 Increased Costs................................................. 19
SECTION 3. Fees; Commitments............................................... 20
3.01 Fees............................................................ 20
3.02 Voluntary Termination or Reduction of Total Unutilized
Revolving Loan Commitment.................................... 21
3.03 Mandatory Adjustments of Commitments, etc....................... 21
SECTION 4. Payments........................................................ 22
4.01 Voluntary Prepayments........................................... 22
4.02 Mandatory Prepayments........................................... 23
4.03 Method and Place of Payment..................................... 29
4.04 Net Payments.................................................... 30
SECTION 5. Conditions Precedent............................................ 32
5.01 Execution of Agreement; Notes................................... 32
5.02 No Default; Representations and Warranties...................... 32
5.03 Officer's Certificate........................................... 32
5.04 Opinions of Counsel............................................. 32
(i)
<PAGE>
Page
----
5.05 Corporate Proceedings........................................... 32
5.06 Adverse Change, etc............................................. 33
5.07 Litigation...................................................... 33
5.08 Approvals....................................................... 33
5.09 Consummation of the Transaction................................. 34
5.10 Security Documents.............................................. 35
5.11 Subsidiary Guaranty............................................. 36
5.12 Mortgages; Title Insurance; Surveys, etc........................ 36
5.13 Plans; Collective Bargaining Agreements; Existing Indebtedness
Agreements; Shareholders' Agreements; Management
Agreements; Employment Agreements; Tax Allocation
Agreements; Material Contracts.............................. 38
5.14 Solvency Certificate; Environmental Analyses; Insurance
Analyses; Financial Statements.............................. 39
5.15 Pro Forma Balance Sheets........................................ 40
5.16 Projections..................................................... 40
5.17 Existing Indebtedness........................................... 40
5.18 Payment of Fees................................................. 40
5.19 Notice of Borrowing; Letter of Credit Request................... 40
SECTION 6. Representations, Warranties and Agreements...................... 41
6.01 Corporate Status................................................ 41
6.02 Corporate Power and Authority................................... 41
6.03 No Violation.................................................... 41
6.04 Litigation...................................................... 42
6.05 Use of Proceeds; Margin Regulations............................. 42
6.06 Governmental Approvals.......................................... 42
6.07 Investment Company Act.......................................... 42
6.08 Public Utility Holding Company Act.............................. 43
6.09 True and Complete Disclosure.................................... 43
6.10 Financial Condition; Financial Statements....................... 43
6.11 Security Interests.............................................. 44
6.12 Representations and Warranties in Other Documents............... 45
6.13 Transaction..................................................... 45
6.14 Special Purpose Corporation..................................... 45
6.15 Compliance with ERISA........................................... 46
6.16 Capitalization.................................................. 47
6.17 Subsidiaries.................................................... 47
6.18 Intellectual Property........................................... 47
6.19 Compliance with Statutes, etc................................... 48
6.20 Environmental Matters........................................... 48
6.21 Properties...................................................... 49
6.22 Labor Relations................................................. 49
(ii)
<PAGE>
Page
----
6.23 Tax Returns and Payments........................................ 49
6.24 Existing Indebtedness........................................... 50
6.25 Subordination................................................... 50
SECTION 7. Affirmative Covenants........................................... 50
7.01 Information Covenants........................................... 50
7.02 Books, Records and Inspections.................................. 53
7.03 Insurance....................................................... 54
7.04 Payment of Taxes................................................ 54
7.05 Corporate Franchises............................................ 54
7.06 Compliance with Statutes, etc................................... 54
7.07 Compliance with Environmental Laws.............................. 55
7.08 ERISA........................................................... 55
7.09 Good Repair..................................................... 56
7.10 End of Fiscal Years; Fiscal Quarters............................ 56
7.11 Additional Security; Further Assurances......................... 56
7.12 Interest Rate Protection........................................ 57
7.13 Register........................................................ 57
7.14 Maintenance of Corporate Separateness........................... 58
7.15 Foreign Subsidiaries Security................................... 58
7.16 Contributions; Payments......................................... 59
7.17 Name Changes.................................................... 60
SECTION 8. Negative Covenants.............................................. 60
8.01 Changes in Business............................................. 60
8.02 Consolidation, Merger, Sale or Purchase of Assets, etc.......... 61
8.03 Liens........................................................... 66
8.04 Indebtedness.................................................... 68
8.05 Advances, Investments and Loans................................. 70
8.06 Dividends, etc.................................................. 74
8.07 Transactions with Affiliates.................................... 76
8.08 Capital Expenditures............................................ 77
8.09 Minimum Consolidated EBITDA..................................... 78
8.10 Interest Coverage Ratio......................................... 79
8.11 Leverage Ratio.................................................. 79
8.12 Limitation on Voluntary Payments and Modifications
of Indebtedness; Modifications of Certificate of
Incorporation, By-Laws and Certain Other Agreements;
Issuance of Capital Stock; etc.............................. 80
8.13 Limitation on Certain Restrictions on Subsidiaries............... 80
8.14 Limitation on the Creation of Subsidiaries....................... 81
8.15 Seller Subordinated Note......................................... 81
(iii)
<PAGE>
Page
----
SECTION 9. Events of Default............................................. 81
9.01 Payments...................................................... 82
9.02 Representations, etc.......................................... 82
9.03 Covenants..................................................... 82
9.04 Default Under Other Agreements................................ 82
9.05 Bankruptcy, etc............................................... 82
9.06 ERISA......................................................... 83
9.07 Security Documents............................................ 83
9.08 Guaranties.................................................... 84
9.09 Judgments..................................................... 84
9.10 Ownership..................................................... 84
SECTION 10. Definitions................................................... 84
SECTION 11. The Agent..................................................... 113
11.01 Appointment................................................... 113
11.02 Delegation of Duties.......................................... 113
11.03 Exculpatory Provisions........................................ 113
11.04 Reliance by Agent............................................. 114
11.05 Notice of Default............................................. 114
11.06 Non-Reliance on Agent and Other Banks......................... 115
11.07 Indemnification............................................... 115
11.08 Agent in its Individual Capacity.............................. 116
11.09 Holders....................................................... 116
11.10 Resignation of the Agent; Successor Agent..................... 116
SECTION 12. Miscellaneous................................................. 117
12.01 Payment of Expenses, etc...................................... 117
12.02 Right of Setoff, Collateral Matters........................... 117
12.03 Notices....................................................... 118
12.04 Benefit of Agreement.......................................... 119
12.05 No Waiver; Remedies Cumulative................................ 120
12.06 Payments Pro Rata............................................. 121
12.07 Calculations; Computations.................................... 121
12.08 Governing Law; Submission to Jurisdiction; Venue.............. 122
12.09 Counterparts.................................................. 122
12.10 Effectiveness................................................. 122
12.11 Headings Descriptive.......................................... 123
12.12 Amendment or Waiver; etc...................................... 123
12.13 Survival...................................................... 124
12.14 Domicile of Loans............................................. 124
12.15 Confidentiality............................................... 124
12.16 Waiver of Jury Trial.......................................... 125
(iv)
<PAGE>
Page
----
SECTION 13. Holdings Guaranty.............................................. 125
13.01 The Guaranty................................................... 125
13.02 Bankruptcy..................................................... 126
13.03 Nature of Liability............................................ 126
13.04 Independent Obligation......................................... 126
13.05 Authorization.................................................. 127
13.06 Reliance....................................................... 128
13.07 Subordination.................................................. 128
13.08 Waiver......................................................... 128
13.09 Nature of Liability............................................ 129
ANNEX I List of Banks
ANNEX II Bank Addresses
ANNEX III Real Properties
ANNEX IV Projections
ANNEX V Subsidiaries
ANNEX VI Insurance
ANNEX VII Existing Indebtedness
ANNEX VIII Existing Liens
ANNEX IX Acquired Subsidiaries
ANNEX X Capitalization
ANNEX XI Investments
ANNEX XII Projected Consolidated EBITDA
ANNEX XIII Excluded Intellectual Property
ANNEX XIV Asset Sales
ANNEX XV Acquisition Documents
ANNEX XVI Financial Statements
ANNEX XVII Conflicts
EXHIBIT A-1 -- Form of Notice of Borrowing
EXHIBIT A-2 -- Form of Letter of Credit Request
EXHIBIT B-1 -- Form of A Term Note
EXHIBIT B-2 -- Form of B Term Note
EXHIBIT B-3 -- Form of Revolving Note
EXHIBIT B-4 -- Form of Swingline Note
EXHIBIT C -- Form of Section 4.04(b)(ii) Certificate
EXHIBIT D -- Form of Opinion of Kirkland & Ellis
EXHIBIT E -- Form of Officers' Certificate
EXHIBIT F -- Form of Pledge Agreement
EXHIBIT G -- Form of Security Agreement
EXHIBIT H -- Form of Subsidiary Guaranty
EXHIBIT I -- Form of Assignment and Assumption Agreement
EXHIBIT J -- Form of Intercompany Note
(v)
<PAGE>
EXHIBIT K -- Form of Solvency Certificate
EXHIBIT L -- Form of Shareholder Subordinated Note
EXHIBIT M -- Form of Borrower Subordinated Note
(vi)
<PAGE>
CREDIT AGREEMENT, dated as of October 2, 1996, among WESLEY-JESSEN
HOLDING, INC., a Delaware corporation ("Holdings"), WESLEY-JESSEN CORPORATION, a
Delaware corporation (the "Borrower"), the lenders from time to time party
hereto (each, a "Bank" and, collectively, the "Banks"), and BANKERS TRUST
COMPANY, as Agent (in such capacity, the "Agent"). Unless otherwise defined
herein, all capitalized terms used herein and defined in Section 10 are used
herein as so defined.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, subject to and upon the terms and conditions herein set
forth, the Banks are willing to make available the credit facilities provided
for herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
--------------------------
1.01 Commitments. (A) Subject to and upon the terms and conditions
-----------
herein set forth, each Bank severally agrees to make a loan or loans to the
Borrower, which loans shall be drawn, to the extent such Bank has a commitment
under such Facility, under the A Term Loan Facility, the B Term Loan Facility
and the Revolving Loan Facility, as set forth below:
(a) Loans under the A Term Loan Facility (each, an "A Term Loan" and,
collectively, the "A Term Loans") (i) shall be incurred by the Borrower
pursuant to a single drawing, which shall be on the Initial Borrowing Date,
(ii) shall be denominated in U.S. Dollars, (iii) except as hereinafter
provided, may, at the option of the Borrower, be incurred and maintained as
and/or converted into Base Rate Loans or Eurodollar Loans, provided, that
--------
(x) all A Term Loans made by all Banks pursuant to the same Borrowing
shall, unless otherwise specifically provided herein, consist entirely of A
Term Loans of the same Type and (y) unless the Agent has determined that
the Syndication Date has occurred (at which time this clause (y) shall no
longer be applicable), no more than three Borrowings of A Term Loans to be
maintained as Eurodollar Loans may be incurred prior to the 90th day after
the Initial Borrowing Date (each of which Borrowings of Eurodollar Loans
may only have an Interest Period of one month, and the first of which
Borrowings may only be made on a single date on or after the Initial
Borrowing Date and on or before the sixth Business Day following the
Initial Borrowing Date, the second of which Borrowings may only be made on
the last day of the Interest Period of the first such Borrowing and the
third of which Borrowing may only be made on the last day of the Interest
Period of the second such Borrowing) and (iv) shall not exceed for any Bank
at the time of incurrence thereof on
<PAGE>
the Initial Borrowing Date that aggregate principal amount which equals the
A Term Loan Commitment, if any, of such Bank at such time. Once repaid, A
Term Loans may not be reborrowed.
(b) Each loan under the B Term Loan Facility (each, a "B Term Loan"
and, collectively, the "B Term Loans") (i) shall be incurred by the
Borrower pursuant to a single drawing, which shall be on the Initial
Borrowing Date, (ii) shall be denominated in U.S. Dollars, (iii) except as
hereinafter provided, may, at the option of the Borrower, be incurred and
maintained as and/or converted into Base Rate Loans or Eurodollar Loans,
provided, that (x) all B Term Loans made by all Banks pursuant to the same
--------
Borrowing shall, unless otherwise specifically provided herein, consist
entirely of B Term Loans of the same Type, (y) unless the Agent has
determined that the Syndication Date has occurred (at which time this
clause (y) shall no longer be applicable), no more than three Borrowings of
B Term Loans to be maintained as Eurodollar Loans may be incurred prior to
the 90th day after the Initial Borrowing Date (each of which Borrowings of
Eurodollar Loans may only have an Interest Period of one month, and the
first of which Borrowings may only be made on a single date on or after the
Initial Borrowing Date and on or before the sixth Business Day following
the Initial Borrowing Date, the second of which Borrowings may only be made
on the last day of the Interest Period of the first such Borrowing and the
third of which Borrowing may only be made on the last day of the Interest
Period of the second such Borrowing) and (z) all B Term Loans incurred by
the Borrower on the Initial Borrowing Date and made as Eurodollar Loans on
such date may only have an Interest Period of one month and (iv) shall not
exceed for any Bank at the time of incurrence thereof on the Initial
Borrowing Date that aggregate principal amount which equals the B Term Loan
Commitment, if any, of such Bank at such time. Once repaid, B Term Loans
may not be reborrowed.
(c) Each loan under the Revolving Loan Facility (each, a "Revolving
Loan" and, collectively, the "Revolving Loans") (i) may be incurred by the
Borrower at any time and from time to time on and after the Initial
Borrowing Date and prior to the Revolving Loan Maturity Date, (ii) shall be
denominated in U.S. Dollars, (iii) except as hereinafter provided, may, at
the option of the Borrower, be incurred and maintained as and/or converted
into Base Rate Loans or Eurodollar Loans, provided, that (x) all Revolving
--------
Loans made as part of the same Borrowing shall, unless otherwise
specifically provided herein, consist of Revolving Loans of the same Type
and (y) unless the Agent has determined that the Syndication Date has
occurred (at which time this clause (y) shall no longer be applicable), no
more than three Borrowings of Revolving Loans to be maintained as
Eurodollar Loans may be incurred prior to the 90th day after the Initial
Borrowing Date (each of which Borrowings of Eurodollar Loans may only have
an Interest Period of one month, and the first of which Borrowings may only
be made on a single date on or after the Initial Borrowing Date and on or
before the sixth Business Day following the Initial Borrowing Date, the
second of which Borrowings may only be made on the last day of the Interest
Period of the first such Borrowing and the third of which Borrowing may
only be made on the last day of the Interest Period
-2-
<PAGE>
of the second such Borrowing), (iv) may be repaid and reborrowed in
accordance with the provisions hereof and (v) shall not exceed for any Bank
at any time outstanding that aggregate principal amount which, when
combined with (I) the aggregate principal amount of all other then
outstanding Revolving Loans made by such Bank and (II) such Bank's RL
Percentage, if any, of the Swingline Loans then outstanding and the Letter
of Credit Outstandings (exclusive of Unpaid Drawings which are repaid with
the proceeds of, and simultaneously with the incurrence of, Revolving Loans
or Swingline Loans) at such time, equals the Revolving Loan Commitment, if
any, of such Bank at such time.
(B) Subject to and upon the terms and conditions herein set forth,
BTCo in its individual capacity agrees to make at any time and from time to time
after the Initial Borrowing Date and prior to the Swingline Expiry Date, a loan
or loans to the Borrower (each, a "Swingline Loan" and, collectively, the
"Swingline Loans"), which Swingline Loans (i) shall be made and maintained as
Base Rate Loans, (ii) shall be denominated in U.S. Dollars, (iii) may be repaid
and reborrowed in accordance with the provisions hereof, (iv) shall not exceed
in aggregate principal amount at any time outstanding, when combined with the
aggregate principal amount of all Revolving Loans then outstanding and the
Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid
with the proceeds of, and simultaneously with the incurrence of, Revolving Loans
or Swingline Loans) at such time, an amount equal to the Total Revolving Loan
Commitment then in effect and (v) shall not exceed in aggregate principal amount
at any time outstanding the Maximum Swingline Amount. Notwithstanding the
foregoing, during each period of fourteen consecutive days occurring prior to
the Swingline Expiry Date, there shall be at least one day on which there are no
outstanding Swingline Loans. BTCo shall not be obligated to make any Swingline
Loans at a time when a Bank Default exists unless BTCo has entered into
arrangements satisfactory to it and the Borrower to eliminate BTCo's risk with
respect to the Defaulting Bank's or Banks' participation in such Swingline
Loans, including by cash collateralizing such Defaulting Bank's or Banks' RL
Percentage of the outstanding Swingline Loans. BTCo will not make a Swingline
Loan after it has received written notice from the Borrower or the Required
Banks stating that a Default or an Event of Default exists until such time as
BTCo shall have received a written notice of (i) rescission of such notice from
the party or parties originally delivering the same or (ii) a waiver of such
Default or Event of Default from the Required Banks.
(C) On any Business Day, BTCo may, in its sole discretion, give
notice to the RL Banks that its outstanding Swingline Loans shall be funded with
a Borrowing of Revolving Loans (provided that each such notice shall be deemed
--------
to have been automatically given upon the occurrence of a Default or an Event of
Default under Section 9.05 or upon the exercise of any of the remedies provided
in the last paragraph of Section 9), in which case a Borrowing of Revolving
Loans constituting Base Rate Loans (each such Borrowing, a "Mandatory
Borrowing") shall be made on the immediately succeeding Business Day by all RL
Banks pro rata based on each RL Bank's RL Percentage, and the proceeds thereof
shall be applied directly to repay BTCo for such outstanding Swingline Loans.
Each RL Bank hereby irrevocably agrees
-3-
<PAGE>
to make Base Rate Loans upon one Business Day's notice pursuant to each
Mandatory Borrowing in the amount and in the manner specified in the preceding
sentence and on the date specified in writing by BTCo, notwithstanding (i) that
the amount of the Mandatory Borrowing may not comply with the Minimum Borrowing
Amount otherwise required hereunder, (ii) whether any conditions specified in
Section 5 are then satisfied, (iii) whether a Default or an Event of Default has
occurred and is continuing, (iv) the date of such Mandatory Borrowing and (v)
any reduction in the Total Revolving Loan Commitment after any such Swingline
Loans were made. In the event that any Mandatory Borrowing cannot for any reason
be made on the date otherwise required above (including, without limitation, as
a result of the commencement of a proceeding under the Bankruptcy Code in
respect of the Borrower), each RL Bank (other than BTCo) hereby agrees that it
shall forthwith purchase from BTCo (without recourse or warranty) such
assignment of the outstanding Swingline Loans as shall be necessary to cause the
RL Banks to share in such Swingline Loans ratably based upon their respective RL
Percentages, provided that all interest payable on the Swingline Loans shall be
--------
for the account of BTCo until the date the respective assignment is purchased
and, to the extent attributable to the purchased assignment, shall be payable to
the RL Bank purchasing same from and after such date of purchase.
1.02 Minimum Borrowing Amounts, etc. The aggregate principal amount
-------------------------------
of each Borrowing under a Facility shall not be less than the Minimum Borrowing
Amount for such Facility. More than one Borrowing may be incurred on any day;
provided, that at no time shall there be outstanding more than fifteen
- --------
Borrowings of Eurodollar Loans.
1.03 Notice of Borrowing. (a) Whenever the Borrower desires to
-------------------
incur Loans under any Facility (excluding Borrowings of Swingline Loans and
Mandatory Borrowings), it shall give the Agent at its Notice Office, prior to
11:00 A.M. (New York time), at least three Business Days' prior written notice
(or telephonic notice promptly confirmed in writing) of each Borrowing of
Eurodollar Loans and at least one Business Day's prior written notice (or
telephonic notice promptly confirmed in writing) of each Borrowing of Base Rate
Loans to be made hereunder. Each such notice (each, a "Notice of Borrowing")
shall, except as provided in Section 1.10, be irrevocable, and, in the case of
each written notice and each confirmation of telephonic notice, shall be in the
form of Exhib-it A-1, appropriately completed to specify (i) the Facility
pursuant to which such Borrowing is to be made, (ii) the aggregate principal
amount of the Loans to be made pursuant to such Borrowing, (iii) the date of
such Borrowing (which shall be a Business Day) and (iv) whether the respective
Borrowing shall consist of Base Rate Loans or, to the extent permitted
hereunder, Eurodollar Loans and, if Eurodollar Loans, the Interest Period to be
initially applicable thereto. The Agent shall promptly give each Bank written
notice (or telephonic notice promptly confirmed in writing) of each proposed
Borrowing, of such Bank's proportionate share thereof, if any, and of the other
matters covered by the Notice of Borrowing.
(b) (i) Whenever the Borrower desires to make a Borrowing of
Swingline Loans hereunder, it shall give BTCo not later than 12:00 Noon (New
York time) on the day such Swingline Loan is to be made, written notice (or
telephonic notice promptly confirmed in
-4-
<PAGE>
writing) of each Swingline Loan to be made hereunder. Each such notice shall be
irrevocable and shall specify in each case (x) the date of such Borrowing (which
shall be a Business Day) and (y) the aggregate principal amount of the Swingline
Loan to be made pursuant to such Borrowing.
(ii) Mandatory Borrowings shall be made upon the notice specified in
Section 1.01(C), with the Borrower irrevocably agreeing, by its incurrence of
any Swingline Loan, to the making of Mandatory Borrowings as set forth in such
Section.
(c) Without in any way limiting the obligation of the Borrower to
confirm in writing any telephonic notice permitted to be given hereunder, the
Agent or BTCo (in the case of a Borrowing of Swingline Loans) or the respective
Letter of Credit Issuer (in the case of Letters of Credit), as the case may be,
may prior to receipt of written confirmation act without liability upon the
basis of such telephonic notice, believed by the Agent, BTCo, or such Letter of
Credit Issuer, as the case may be, in good faith to be from an Authorized
Officer of the Borrower. In each such case, the Borrower hereby waives the
right to dispute the Agent's, BTCo's or such Letter of Credit Issuer's record of
the terms of such telephonic notice.
1.04 Disbursement of Funds. (a) No later than 1:00 P.M. (New York
---------------------
time) on the date specified in each Notice of Borrowing (or (x) in the case of
Swingline Loans, not later than 2:00 P.M. (New York time) on the date specified
in Section 1.03(b)(i) or (y) in the case of Mandatory Borrowings, not later than
12:00 Noon (New York time) on the date specified in Section 1.01(C)), each Bank
with a Commitment under the respective Facility will make available its pro rata
--- ----
share, if any, of each Borrowing requested to be made on such date (or in the
case of Swingline Loans, BTCo shall make available the full amount thereof) in
the manner provided below. All amounts shall be made available to the Agent in
U.S. Dollars and immediately available funds at the Payment Office and the Agent
promptly will make available to the Borrower by depositing to its account at the
Payment Office the aggregate of the amounts so made available in the type of
funds received. Unless the Agent shall have been notified by any Bank prior to
the date of Borrowing that such Bank does not intend to make available to the
Agent its portion of the Borrowing or Borrowings to be made on such date, the
Agent may assume that such Bank has made such amount available to the Agent on
such date of Borrowing, and the Agent, in reliance upon such assumption, may (in
its sole discretion and without any obligation to do so) make available to the
Borrower a corresponding amount. If such corresponding amount is not in fact
made available to the Agent by such Bank and the Agent has made available same
to the Borrower, the Agent shall be entitled to recover such corresponding
amount from such Bank. If such Bank does not pay such corresponding amount
forthwith upon the Agent's demand therefor, the Agent shall promptly notify the
Borrower, and the Borrower shall immediately pay such corresponding amount to
the Agent. The Agent shall also be entitled to recover from the Bank or the
Borrower, as the case may be, interest on such corresponding amount in respect
of each day from the date such corresponding amount was made available by the
Agent to the Borrower to the date such corresponding amount is recovered by the
Agent, at a rate per annum equal to (x) if paid by such Bank, the overnight
-5-
<PAGE>
Federal Funds rate or (y) if paid by the Borrower, the then applicable rate of
interest, calculated in accordance with Section 1.08, for the respective Loans.
(b) Nothing herein shall be deemed to relieve any Bank from its
obligation to fulfill its commitments hereunder or to prejudice any rights which
the Borrower may have against any Bank as a result of any default by such Bank
hereunder.
1.05 Notes. (a) The Borrower's obligation to pay the principal of,
-----
and interest on, all the Loans made to it by each Bank shall be evidenced (i) if
A Term Loans, by a promissory note substantially in the form of Exhibit B-1 with
blanks appropriately completed in conformity herewith (each, an "A Term Note"
and, collectively, the "A Term Notes"), (ii) if B Term Loans, by a promissory
note substantially in the form of Exhibit B-2 with blanks appropriately
completed in conformity herewith (each, a "B Term Note" and, collectively, the
"B Term Notes"), (iii) if Revolving Loans, by a promissory note substantially in
the form of Exhibit B-3 with blanks appropriately completed in conformity
herewith (each, a "Revolving Note" and, collectively, the "Revolving Notes") and
(iv) if Swingline Loans, by a promissory note substantially in the form of
Exhibit B-4 with blanks appropriately completed in conformity herewith (the
"Swingline Note").
(b) The A Term Note issued to each Bank shall (i) be executed by the
Borrower, (ii) be payable to the order of such Bank or its registered assigns
and be dated the Initial Borrowing Date, (iii) be in a stated principal amount
equal to the A Term Loans made by such Bank, (iv) mature on the A Term Loan
Maturity Date, (v) bear interest as provided in the appropriate clause of
Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case
may be, evidenced thereby, (vi) be subject to voluntary prepayment as provided
in Section 4.01, and mandatory repayment as provided in Section 4.02, and (vii)
be entitled to the benefits of this Agreement and the other Credit Documents.
(c) The B Term Note issued to each Bank shall (i) be executed by the
Borrower, (ii) be payable to the order of such Bank or its registered assigns
and be dated the Initial Borrowing Date, (iii) be in a stated principal amount
equal to the B Term Loans made by such Bank, (iv) mature on the B Term Loan
Maturity Date, (v) bear interest as provided in the appropriate clause of
Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case
may be, evidenced thereby, (vi) be subject to voluntary prepayment as provided
in Section 4.01, and mandatory repayment as provided in Section 4.02, and (vii)
be entitled to the benefits of this Agreement and the other Credit Documents.
(d) The Revolving Note issued to each Bank shall (i) be executed by
the Borrower, (ii) be payable to the order of such Bank or its registered
assigns and be dated the Initial Borrowing Date, (iii) be in a stated principal
amount equal to the Revolving Loan Commitment of such Bank and be payable in the
principal amount of the Revolving Loans evidenced thereby, (iv) mature on the
Revolving Loan Maturity Date, (v) bear interest as provided in the appropriate
clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans,
as the case may be, evidenced thereby, (vi) be subject to voluntary prepayment
as pro-
-6-
<PAGE>
vided in Section 4.01, and mandatory repayment as provided in Section 4.02, and
(vii) be entitled to the benefits of this Agreement and the other Credit
Documents.
(e) The Swingline Note issued to BTCo shall (i) be executed by the
Borrower, (ii) be payable to the order of BTCo or its registered assigns and be
dated the Initial Borrowing Date, (iii) be in a stated principal amount equal to
the Maximum Swingline Amount and be payable in the principal amount of the
Swingline Loans evidenced thereby, (iv) mature on the Swingline Expiry Date, (v)
bear interest as provided in Section 1.08 in respect of the Base Rate Loans
evidenced thereby, (vi) be subject to voluntary prepayment as provided in
Section 4.01, and mandatory repayment as provided in Section 4.02, and (vii) be
entitled to the benefits of this Agreement and the other Credit Documents.
(f) Each Bank will note on its internal records the amount of each
Loan made by it and each payment in respect thereof and will prior to any
transfer of any of its Notes endorse on the reverse side thereof the outstanding
principal amount of Loans evidenced thereby. Failure to make any such notation
shall not affect the Borrower's obligations in respect of such Loans.
1.06 Conversions. The Borrower shall have the option to convert on
-----------
any Business Day occurring on or after the Initial Borrowing Date, all or a
portion at least equal to the applicable Minimum Borrowing Amount of the
outstanding principal amount of the Loans (other than Swingline Loans which at
all times shall be maintained as Base Rate Loans) owing by the Borrower pursuant
to a single Facility into a Borrowing or Borrowings of another Type of Loan
under such Facility; provided, that (i) except as otherwise provided in Section
--------
1.10(b), no partial conversion of a Borrowing of Eurodollar Loans shall reduce
the outstanding principal amount of the Eurodollar Loans made pursuant to such
Borrowing to less than the Minimum Borrowing Amount applicable thereto, (ii)
Base Rate Loans may only be converted into Eurodollar Loans if no payment
Default, or Event of Default, is in existence on the date of the conversion,
(iii) Borrowings of Eurodollar Loans resulting from this Section 1.06 shall be
limited in number as provided in Section 1.02 and (iv) unless the Agent has
determined that the Syndication Date has occurred (at which time this clause
(iv) shall no longer be applicable), prior to the 90th day after the Initial
Borrowing Date, conversions of Base Rate Loans into Eurodollar Loans may only be
made if any such conversion is effective on the first day of the first, second
or third Interest Period referred to in clause (y) of the proviso to each of
Section 1.01(A)(a)(iii), 1.01(A)(b)(iii), and 1.01(A)(c)(iii) and then only so
long as such conversion does not result in a greater number of Borrowings of
Eurodollar Loans prior to the 90th day after the Initial Borrowing Date as are
permitted under such Sections. Each such conversion shall be effected by the
Borrower by giving the Agent at its Notice Office, prior to 11:00 A.M. (New York
time), at least three Business Days' (or one Business Day's in the case of a
conversion into Base Rate Loans) prior written notice (or telephonic notice
promptly confirmed in writing) (each, a "Notice of Conversion") specifying the
Loans to be so converted, the Type of Loans to be converted into and, if to be
converted into a Borrowing of Eurodollar Loans, the Interest Period to be
initially applicable thereto. The Agent shall give each Bank prompt notice of
any such proposed conversion affecting any of its Loans.
-7-
<PAGE>
1.07 Pro Rata Borrowings. All Borrowings of Loans (other than
-------------------
Swingline Loans) under this Agreement shall be made by the Banks pro rata on the
--- ----
basis of their A Term Loan Commitments, B Term Loan Commitments or Revolving
Loan Commitments, as the case may be. It is understood that no Bank shall be
responsible for any default by any other Bank of its obligation to make Loans
hereunder and that each Bank shall be obligated to make the Loans to be made by
it hereunder, regardless of the failure of any other Bank to fulfill its
commitments hereunder.
1.08 Interest. (a) The unpaid principal amount of each Base Rate
--------
Loan shall bear interest from the date of the Borrowing thereof until the
earlier of (i) the maturity (whether by acceleration or otherwise) of such Base
Rate Loan and (ii) the conversion of such Base Rate Loan to a Eurodollar Loan
pursuant to Section 1.06, at a rate per annum which shall at all times be the
Applicable Base Rate Margin plus the Base Rate in effect from time to time.
(b) The unpaid principal amount of each Eurodollar Loan shall bear
interest from the date of the Borrowing thereof until the earlier of (i) the
maturity (whether by acceleration or otherwise) of such Eurodollar Loan and (ii)
the conversion of such Eurodollar Loan to a Base Rate Loan pursuant to Section
1.06, 1.09 or 1.10(b), as applicable, at a rate per annum which shall at all
times be the Applicable Eurodollar Margin plus the relevant Eurodollar Rate.
(c) Overdue principal and, to the extent permitted by law, overdue
interest in respect of each Loan shall bear interest at a rate per annum equal
to the greater of (x) the rate which is 2% in excess of the rate then borne by
such Loans and (y) the rate which is 2% in excess of the rate otherwise
applicable to Base Rate Loans of such Facility from time to time. Interest which
accrues under this Section 1.08(c) shall be payable on demand.
(d) Interest shall accrue from and including the date of any
Borrowing to but excluding the date of any repayment thereof and shall be
payable (i) in respect of each Base Rate Loan, quarterly in arrears on each
Quarterly Payment Date, (ii) in respect of each Eurodollar Loan, on (x) the date
of any prepayment or repayment thereof (on the amount prepaid or repaid), (y)
the date of any conversion into a Base Rate Loan pursuant to Section 1.06, 1.09
or 1.10(b), as applicable (on the amount converted) and (z) the last day of each
Interest Period applicable thereto and, in the case of an Interest Period in
excess of three months, on each date occurring at three month intervals after
the first day of such Interest Period and (iii) in respect of each Loan, at
maturity (whether by acceleration or otherwise) and, after such maturity, on
demand.
(e) All computations of interest hereunder shall be made in
accordance with Section 12.07(b).
(f) The Agent, upon determining the interest rate for any Borrowing
of Eurodollar Loans for any Interest Period, shall promptly notify the Borrower
and the Banks thereof.
-8-
<PAGE>
1.09 Interest Periods. At the time the Borrower gives a Notice of
----------------
Borrowing or Notice of Conversion in respect of the making of, or conversion
into, a Borrowing of Eurodollar Loans (in the case of the initial Interest
Period applicable thereto) or prior to 12:00 Noon (New York time) on the third
Business Day prior to the expiration of an Interest Period applicable to a
Borrowing of Eurodollar Loans, it shall have the right to elect by giving the
Agent written notice (or telephonic notice promptly confirmed in writing) of the
Interest Period applicable to such Borrowing, which Interest Period shall, at
the option of the Borrower, be a one, two, three or six-month period or, to the
extent approved by all Banks with a Commitment and/or outstanding Loans, as the
case may be, of the respective Facility, a twelve-month period. Notwithstanding
anything to the contrary contained above:
(i) all Eurodollar Loans comprising a Borrowing shall have the same
Interest Period;
(ii) the initial Interest Period for any Borrowing of Eurodollar
Loans shall commence on the date of such Borrowing (including the date of
any conversion from a Borrowing of Base Rate Loans) and each Interest
Period occurring thereafter in respect of such Borrowing shall commence on
the day on which the next preceding Interest Period expires;
(iii) if any Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period, such Interest Period shall end on the last Business Day of
such calendar month;
(iv) if any Interest Period would otherwise expire on a day which is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day, provided, that if any Interest Period would
--------
otherwise expire on a day which is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(v) no Interest Period for a Borrowing under a Facility may be
elected if it would extend beyond the respective Maturity Date for such
Facility;
(vi) no Interest Period may be elected at any time when a payment
Default, or an Event of Default, is then in existence; and
(vii) no Interest Period with respect to any Borrowing of Term
Loans shall extend beyond any date upon which a mandatory prepayment of
such Term Loans is required to be made under Section 4.02(A)(b)(i) or (ii),
as the case may be, if, after giving effect to the selection of such
Interest Period, the aggregate principal amount of such Term Loans
maintained as Eurodollar Loans with Interest Periods ending after such date
of mandatory repayment would exceed the aggregate principal amount of such
Term Loans permitted to be outstanding after such mandatory prepayment.
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<PAGE>
If upon the expiration of any Interest Period, the Borrower has failed to elect,
or is not permitted to elect by virtue of the application of clause (vi) above,
a new Interest Period to be applicable to the respective Borrowing of Eurodollar
Loans as provided above, the Borrower shall be deemed to have elected to convert
such Borrowing into a Borrowing of Base Rate Loans effective as of the
expiration date of such current Interest Period.
1.10 Increased Costs, Illegality, etc. (a) In the event that (x) in
---------------------------------
the case of clause (i) below, the Agent or (y) in the case of clauses (ii) and
(iii) below, any Bank, shall have determined (which determination shall, absent
manifest error, be final and conclusive and binding upon all parties hereto):
(i) on any date for determining the Eurodollar Rate for any Interest
Period, that, by reason of any changes arising after the date of this
Agreement affecting the interbank Eurodollar market, adequate and fair
means do not exist for ascertaining the applicable interest rate on the
basis provided for in the definition of Eurodollar Rate; or
(ii) at any time, that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect to
any Eurodollar Loans (other than any increased cost or reduction in the
amount received or receivable resulting from the imposition of or a change
in the rate of net income taxes or similar charges) because of (x) any
change since the date of this Agreement in any applicable law, governmental
rule, regulation, guideline, order or request (whether or not having the
force of law), or in the interpretation or administration thereof and
including the introduction of any new law or governmental rule, regulation,
guideline, order or request (such as, for example, but not limited to a
change in official reserve requirements, but, in all events, excluding
reserves required under Regulation D to the extent included in the
computation of the Eurodollar Rate) and/or (y) other circumstances
affecting such Bank, the interbank Eurodollar market or the position of
such Bank in such market; or
(iii) at any time since the date of this Agreement, that the making
or continuance of any Eurodollar Loan has become unlawful by compliance by
such Bank in good faith with any law, governmental rule, regulation,
guideline or order (or would conflict with any such governmental rule,
regulation, guideline or order not having the force of law but with which
such Bank customarily complies even though the failure to comply therewith
would not be unlawful), or has become impracticable as a result of a
contingency occurring after the date of this Agreement which materially and
adversely affects the interbank Eurodollar market;
then, and in any such event, such Bank (or the Agent in the case of clause (i)
above) shall (x) on such date and (y) as promptly as practicable (and in any
event within five Business Days) after the date on which such event no longer
exists give notice (by telephone confirmed in writing) to the Borrower and
(except in the case of clause (i)) to the Agent of such determination
-10-
<PAGE>
(which notice the Agent shall promptly transmit to each of the other Banks).
Thereafter, (x) in the case of clause (i) above, Eurodollar Loans shall no
longer be available until such time as the Agent notifies the Borrower and the
Banks that the circumstances giving rise to such notice by the Agent no longer
exist, and any Notice of Borrowing or Notice of Conversion given by the Borrower
with respect to Eurodollar Loans which have not yet been incurred shall be
deemed rescinded by the Borrower, (y) in the case of clause (ii) above, the
Borrower agrees to pay to such Bank, upon written demand therefor (accompanied
by the written notice referred to below), such additional amounts (in the form
of an increased rate of, or a different method of calculating, interest or
otherwise as such Bank in its sole discretion shall determine) as shall be
required to compensate such Bank for such increased costs or reductions in
amounts received or receivable hereunder (a written notice as to the additional
amounts owed to such Bank, showing the basis for the calculation thereof,
submitted to the Borrower by such Bank shall, absent manifest error, be final
and conclusive and binding upon all parties hereto) and (z) in the case of
clause (iii) above, the Borrower shall take one of the actions specified in
Section 1.10(b) as promptly as possible and, in any event, within the time
period required by law.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and
in the case of a Eurodollar Loan affected pursuant to Section 1.10(a)(iii) the
Borrower shall) either (i) if the affected Eurodollar Loan is then being made
pursuant to a Borrowing, cancel said Borrowing by giving the Agent telephonic
notice (confirmed promptly in writing) thereof on the same date that the
Borrower was notified by a Bank pursuant to Section 1.10(a)(ii) or (iii)), or
(ii) if the affected Eurodollar Loan is then outstanding, upon at least three
Business Days' notice to the Agent, require the affected Bank to convert each
such Eurodollar Loan into a Base Rate Loan (which conversion, in the case of the
circumstances described in Section 1.10(a)(iii), shall occur no later than the
last day of the Interest Period then applicable to such Eurodollar Loan (or such
earlier date as shall be required by applicable law)); provided, that if more
--------
than one Bank is affected at any time, then all affected Banks must be treated
the same pursuant to this Section 1.10(b).
(c) If any Bank shall have determined that after the date hereof, the
adoption or effectiveness of any applicable law, rule or regulation regarding
capital adequacy, or any change therein, or any change in the interpretation or
administration thereof by the National Association of Insurance Commissioners
("NAIC") or any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by such
Bank or any corporation controlling such Bank with any request or directive
regarding capital adequacy (whether or not having the force of law) of the NAIC
or any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on such Bank's or such other corporation's
capital or assets as a consequence of such Bank's Commitments or obligations
hereunder to a level below that which such Bank or such other corporation could
have achieved but for such adoption, effectiveness, change or compliance (taking
into consideration such Bank's or such other corporation's policies with respect
to capital adequacy), then from time to time, upon written demand by such Bank
(with a copy to the Agent), accompanied by the notice referred to in the last
sentence of this clause (c), the Borrower agrees to pay to such Bank such
additional amount or amounts as will compensate
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<PAGE>
such Bank or such other corporation for such reduction. Each Bank, upon
determining in good faith that any additional amounts will be payable pursuant
to this Section 1.10(c), will give prompt written notice thereof to the
Borrower, which notice shall set forth the basis of the calculation of such
additional amounts, although the failure to give any such notice shall not
release or diminish the Borrower's obligations to pay additional amounts
pursuant to this Section 1.10(c) upon the subsequent receipt of such notice.
1.11 Compensation. The Borrower agrees to compensate each Bank,
------------
promptly upon its written request (which request shall set forth the basis for
requesting such compensation and shall be made through the Agent), for all
reasonable losses, expenses and liabilities (including, without limitation, any
loss, expense or liability incurred by reason of the liquidation or reemployment
of deposits or other funds required by such Bank to fund its Eurodollar Loans
but excluding loss of anticipated profit with respect to any Loans) which such
Bank may sustain: (i) if for any reason (other than a default by such Bank or
the Agent) a Borrowing of Eurodollar Loans does not occur on a date specified
therefor in a Notice of Borrowing or Notice of Conversion (whether or not
withdrawn by the Borrower or deemed withdrawn pursuant to Section 1.10(a)); (ii)
if any repayment (including any repayment made pursuant to Section 4.02 or as a
result of an acceleration of the Loans pursuant to Section 9) or conversion of
any Eurodollar Loans occurs on a date which is not the last day of an Interest
Period applicable thereto; (iii) if any prepayment of any Eurodollar Loans is
not made on any date specified in a notice of prepayment given by the Borrower;
or (iv) as a consequence of (x) any other default by the Borrower to repay its
Eurodollar Loans when required by the terms of this Agreement or (y) an election
made pursuant to Section 1.10(b). Calculation of all amounts payable to a Bank
under this Section 1.11 shall be made as though that Bank had actually funded
its relevant Eurodollar Loan through the purchase of a Eurodollar deposit
bearing interest at the Eurodollar Rate in an amount equal to the amount of that
Loan, having a maturity comparable to the relevant Interest Period and through
the transfer of such Eurodollar deposit from an offshore office of that Bank to
a domestic office of that Bank in the United States of America; provided,
--------
however, that each Bank may fund each of its Eurodollar Loans in any manner it
- -------
sees fit and the foregoing assumption shall be utilized only for the calculation
of amounts payable under this Section 1.11. It is further understood and agreed
that if any repayment of Eurodollar Loans pursuant to Section 4.01 or any
conversion of Eurodollar Loans pursuant to Section 1.06 in either case occurs on
a date which is not the last day of an Interest Period applicable thereto, such
repayment or conversion shall be accompanied by any amounts owing to any Bank
pursuant to this Section 1.11.
1.12 Change of Lending Office. Each Bank agrees that, upon the
------------------------
occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or
(iii), 1.10(c), 2.05 or 4.04 with respect to such Bank, it will, if requested by
the Borrower, use reasonable efforts (subject to overall policy considerations
of such Bank) to designate another lending office for any Loans or Letters of
Credit affected by such event; provided, that such designation is made on such
--------
terms that, in the sole judgment of such Bank, such Bank and its lending office
suffer no economic, legal or regulatory disadvantage, with the object of
avoiding the consequences of the event giving rise to the operation of any such
Section. Nothing in this Section 1.12 shall affect
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<PAGE>
or postpone any of the
obligations of the Borrower or the right of any Bank provided in Section 1.10,
2.05 or 4.04.
1.13 Replacement of Banks. (x) If any Bank becomes a Defaulting
--------------------
Bank, (y) upon the occurrence of any event giving rise to the operation of
Section 1.10(a)(ii) or (iii), Section 1.10(c), Section 2.05 or Section 4.04 with
respect to any Bank which results in such Bank charging to the Borrower
increased costs in excess of those being generally charged by the other Banks or
(z) in the case of a refusal by a Bank to consent to a proposed change, waiver,
discharge or termination with respect to this Agreement which has been approved
by the Required Banks as provided in Section 12.12(b), the Borrower shall have
the right, if no payment Default, or Event of Default, then exists, to replace
such Bank (the "Replaced Bank") with one or more other Eligible Transferee or
Transferees, none of whom shall constitute a Defaulting Bank at the time of such
replacement (collectively, the "Replacement Bank") reasonably acceptable to the
Agent, provided that (i) at the time of any replacement pursuant to this Section
--------
1.13, the Replacement Bank shall enter into one or more Assignment and
Assumption Agreements pursuant to Section 12.04(b) (and with all fees payable
pursuant to said Section 12.04(b) to be paid by the Replacement Bank) pursuant
to which the Replacement Bank shall acquire all of the Commitments and
outstanding Loans of, and in each case participations in Letters of Credit by,
the Replaced Bank and, in connection therewith, shall pay to (x) the Replaced
Bank in respect thereof an amount equal to the sum of (A) an amount equal to the
principal of, and all accrued interest on, all outstanding Loans of the Replaced
Bank, (B) an amount equal to all Unpaid Drawings that have been funded by (and
not reimbursed to) such Replaced Bank, together with all then unpaid interest
with respect thereto at such time and (C) an amount equal to all accrued, but
theretofore unpaid, Fees owing to the Replaced Bank pursuant to Section 3.01,
(y) the respective Letter of Credit Issuer an amount equal to such Replaced
Bank's RL Percentage of any Unpaid Drawing (which at such time remains an Unpaid
Drawing) with respect to a Letter of Credit issued by it to the extent such
amount was not theretofore funded by such Replaced Bank and (z) BTCo an amount
equal to such Replaced Bank's RL Percentage of any Mandatory Borrowing to the
extent such amount was not theretofore funded by such Replaced Bank, and (ii)
all obligations (including, without limitation, all such amounts, if any, due
and owing under Section 1.11) of the Borrower due and owing to the Replaced Bank
(other than those specifically described in clause (i) above in respect of which
the assignment purchase price has been, or is concurrently being, paid) shall be
paid in full to such Replaced Bank concurrently with such replacement. Upon the
execution of the respective Assignment and Assumption Agreements, the payment of
amounts referred to in clauses (i) and (ii) above, recordation of the assignment
on the Register by the Agent pursuant to Section 7.13 and, if so requested by
the Replacement Bank, delivery to the Replacement Bank of the appropriate Note
or Notes executed by the Borrower, (x) the Replacement Bank shall become a Bank
hereunder and the Replaced Bank shall cease to constitute a Bank hereunder,
except with respect to indemnification provisions under this Agreement, which
shall survive as to such Replaced Bank and (y) Annex I hereto shall be deemed
modified to reflect the changed Commitments (and/or outstanding Term Loans, as
the case may be) resulting from the assignment from the Replaced Bank to the
Replacement Bank.
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<PAGE>
SECTION 2. Letters of Credit.
-----------------
2.01 Letters of Credit. (a) Subject to and upon the terms and
-----------------
conditions herein set forth, the Borrower may request a Letter of Credit Issuer
at any time and from time to time on or after the Initial Borrowing Date and
prior to the Revolving Loan Maturity Date to issue, for the account of the
Borrower and in support of, (x) trade obligations of the Borrower or any of its
Subsidiaries that arise in the ordinary course of business and are in respect of
general corporate purposes of the Borrower or its Subsidiaries, as the case may
be, and/or (y) on a standby basis, L/C Supportable Indebtedness, and subject to
and upon the terms and conditions herein set forth each Letter of Credit Issuer
agrees to issue from time to time, irrevocable letters of credit in such form as
may be approved by such Letter of Credit Issuer (each such letter of credit, a
"Letter of Credit" and, collectively, the "Letters of Credit"). Notwithstanding
the foregoing, no Letter of Credit Issuer shall be under any obligation to issue
any Letter of Credit if at the time of such issuance:
(i) any order, judgment or decree of any governmental authority or
arbitrator shall purport by its terms to enjoin or restrain such Letter of
Credit Issuer from issuing such Letter of Credit or any requirement of law
applicable to such Letter of Credit Issuer or any request or directive
(whether or not having the force of law) from any governmental authority
with jurisdiction over such Letter of Credit Issuer shall prohibit, or
request that such Letter of Credit Issuer refrain from, the issuance of
letters of credit generally or such Letter of Credit in particular or shall
impose upon such Letter of Credit Issuer with respect to such Letter of
Credit any restriction or reserve or capital requirement (for which such
Letter of Credit Issuer is not otherwise compensated) not in effect on the
date hereof, or any unreimbursed loss, cost or expense which was not
applicable, in effect or known to such Letter of Credit Issuer as of the
date hereof and which such Letter of Credit Issuer in good faith deems
material to it; or
(ii) such Letter of Credit Issuer shall have received notice from the
Required Banks prior to the issuance of such Letter of Credit of the type
described in clause (vi) of Section 2.01(b).
(b) Notwithstanding the foregoing, (i) no Letter of Credit shall
be issued the Stated Amount of which, when added to the Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid on the date of, and
prior to the issuance of, the respective Letter of Credit) at such time, would
exceed either (x) $17,000,000 or (y) when added to the aggregate principal
amount of all Revolving Loans and Swingline Loans then outstanding, the Total
Revolving Loan Commitment at such time; (ii) (x) each standby Letter of Credit
shall have an expiry date occurring not later than one year after such standby
Letter of Credit's date of issuance, provided, that any standby Letter of Credit
--------
may be automatically extendable for periods of up to one year so long as such
standby Letter of Credit provides that the respective Letter of Credit Issuer
retains an option, satisfactory to such Letter of Credit Issuer, to terminate
such standby Letter of Credit within a specified period of time prior to each
scheduled extension date and (y) each trade Letter of Credit shall have an
expiry date occurring
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<PAGE>
not later than 180 days after such trade Letter of Credit's date of issuance;
(iii) (x) no standby Letter of Credit shall have an expiry date occurring later
than the Business Day next preceding the Revolving Loan Maturity Date and (y) no
trade Letter of Credit shall have an expiry date occurring later than 30 days
prior to the Revolving Loan Maturity Date; (iv) each Letter of Credit shall be
denominated in U.S. Dollars and payable on a sight basis; (v) the Stated Amount
of each Letter of Credit shall not be less than $100,000 or such lesser amount
as is acceptable to the Letter of Credit Issuer; and (vi) no Letter of Credit
Issuer will issue any Letter of Credit after it has received written notice from
the Borrower or the Required Banks stating that a Default or an Event of Default
exists until such time as such Letter of Credit Issuer shall have received a
written notice of (i) rescission of such notice from the party or parties
originally delivering the same or (ii) a waiver of such Default or Event of
Default by the Required Banks.
(c) Notwithstanding the foregoing, in the event a Bank Default
exists, no Letter of Credit Issuer shall be required to issue any Letter of
Credit unless the respective Letter of Credit Issuer has entered into
arrangements satisfactory to it and the Borrower to eliminate such Letter of
Credit Issuer's risk with respect to the participation in Letters of Credit of
the Defaulting Bank or Banks, including by cash collateralizing such Defaulting
Bank's or Banks' RL Percentage of the Letter of Credit Outstandings.
2.02 Letter of Credit Requests; Notices of Issuance. (a) Whenever
----------------------------------------------
it desires that a Letter of Credit be issued, the Borrower shall give the Agent
and the respective Letter of Credit Issuer written notice (or telephonic notice
confirmed in writing) thereof prior to 12:00 Noon (New York time) at least five
Business Days (or such shorter period as may be acceptable to such Letter of
Credit Issuer) prior to the proposed date of issuance (which shall be a Business
Day) which written notice shall be in the form of Exhibit A-2 (each such notice,
a "Letter of Credit Request"). Each Letter of Credit Request shall include any
other documents as the respective Letter of Credit Issuer customarily requires
in connection therewith.
(b) Each Letter of Credit Issuer shall, promptly after the date of
each issuance of or amendment or modification to a Letter of Credit by it, give
the Agent, each RL Bank and the Borrower written notice of the issuance of or
amendment or modification to such Letter of Credit, accompanied by a copy to the
Agent of such Letter of Credit or Letters of Credit or such amendment or
modification.
2.03 Agreement to Repay Letter of Credit Payments. (a) The Borrower
--------------------------------------------
hereby agrees to reimburse the respective Letter of Credit Issuer, by making
payment to the Agent in immediately available funds at the Payment Office, for
any payment or disbursement made by such Letter of Credit Issuer under any
Letter of Credit issued by it (each such amount so paid or disbursed until
reimbursed, an "Unpaid Drawing") no later than one Business Day following the
date of such payment or disbursement, with interest on the amount so paid or
disbursed by such Letter of Credit Issuer, to the extent not reimbursed prior to
1:00 P.M. (New York time) on the date of such payment or disbursement, from and
including the date paid or disbursed to but not including the date such Letter
of Credit Issuer is reimbursed therefor at a
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<PAGE>
rate per annum which shall be the Applicable Base Rate Margin plus the Base Rate
as in effect from time to time for Revolving Loans (plus an additional 2% per
annum if not reimbursed by the third Business Day after the date of such payment
or disbursement), such interest also to be payable on demand. Each Letter of
Credit Issuer shall provide the Borrower prompt notice of any payment or
disbursement made by it under any Letter of Credit issued by it, although the
failure of, or delay in, giving any such notice shall not release or diminish
the obligations of the Borrower under this Section 2.03(a) or under any other
Section of this Agreement.
(b) The Borrower's obligation under this Section 2.03 to reimburse
the respective Letter of Credit Issuer with respect to Unpaid Drawings
(including, in each case, interest thereon) shall be absolute and unconditional
under any and all circumstances and irrespective of any setoff, counterclaim or
defense to payment which the Borrower may have or have had against such Letter
of Credit Issuer, the Agent or any Bank, including, without limitation, any
defense based upon the failure of any drawing under a Letter of Credit issued by
it to substantially conform to the terms of the Letter of Credit or any non-
application or misapplication by the beneficiary of the proceeds of such
drawing; provided, however, that the Borrower shall not be obligated to
-------- -------
reimburse such Letter of Credit Issuer for any wrongful payment made by such
Letter of Credit Issuer under a Letter of Credit issued by it as a result of
acts or omissions constituting willful misconduct or gross negligence on the
part of such Letter of Credit Issuer.
2.04 Letter of Credit Participations. (a) Immediately upon the
-------------------------------
issuance by a Letter of Credit Issuer of any Letter of Credit, such Letter of
Credit Issuer shall be deemed to have sold and transferred to each other RL
Bank, and each such RL Bank (each, a "Participant") shall be deemed irrevocably
and unconditionally to have purchased and received from such Letter of Credit
Issuer, without recourse or warranty, an undivided interest and participation,
to the extent of such Participant's RL Percentage, in such Letter of Credit,
each substitute Letter of Credit, each drawing made thereunder and the
obligations of the Borrower under this Agreement with respect thereto (although
Letter of Credit Fees shall be payable directly to the Agent for the account of
the RL Banks as provided in Section 3.01(b) and the Participants shall have no
right to receive any portion of any Facing Fees) and any security therefor or
guaranty pertaining thereto. Upon any change in the Revolving Loan Commitments
of the RL Banks pursuant to Section 1.13 or 12.04(b) or otherwise, it is hereby
agreed that, with respect to all outstanding Letters of Credit and Unpaid
Drawings, there shall be an automatic adjustment to the participations pursuant
to this Section 2.04 to reflect the new RL Percentages of the assigning and
assignee Banks.
(b) In determining whether to pay under any Letter of Credit, no
Letter of Credit Issuer shall have any obligation relative to the Participants
other than to determine that any documents required to be delivered under such
Letter of Credit have been delivered and that they appear to comply on their
face with the requirements of such Letter of Credit. Any action taken or
omitted to be taken by any Letter of Credit Issuer under or in connection with
any Letter of Credit issued by it if taken or omitted in the absence of gross
negligence or willful misconduct, shall not create for such Letter of Credit
Issuer any resulting liability.
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<PAGE>
(c) In the event that any Letter of Credit Issuer makes any payment
under any Letter of Credit issued by it and the Borrower shall not have
reimbursed such amount in full to such Letter of Credit Issuer pursuant to
Section 2.03(a), such Letter of Credit Issuer shall promptly notify the Agent,
and the Agent shall promptly notify each Participant of such failure, and each
Participant shall promptly and unconditionally pay to the Agent for the account
of such Letter of Credit Issuer, the amount of such Participant's RL Percentage
of such payment in U.S. Dollars and in same day funds; provided, however, that
-------- -------
no Participant shall be obligated to pay to the Agent its RL Percentage of such
unreimbursed amount for any wrongful payment made by such Letter of Credit
Issuer under a Letter of Credit issued by it as a result of acts or omissions
constituting willful misconduct or gross negligence on the part of such Letter
of Credit Issuer. If the Agent so notifies any Participant required to fund a
payment under a Letter of Credit prior to 11:00 A.M. (New York time) on any
Business Day, such Participant shall make available to the Agent for the account
of the respective Letter of Credit Issuer such Participant's RL Percentage of
the amount of such payment on such Business Day in same day funds. If and to
the extent such Participant shall not have so made its RL Percentage of the
amount of such payment available to the Agent for the account of the respective
Letter of Credit Issuer, such Participant agrees to pay to the Agent for the
account of such Letter of Credit Issuer, forthwith on demand such amount,
together with interest thereon, for each day from such date until the date such
amount is paid to the Agent for the account of such Letter of Credit Issuer at
the overnight Federal Funds rate. The failure of any Participant to make
available to the Agent for the account of the respective Letter of Credit Issuer
its RL Percentage of any payment under any Letter of Credit issued by it shall
not relieve any other Participant of its obligation hereunder to make available
to the Agent for the account of such Letter of Credit Issuer its RL Percentage
of any payment under any such Letter of Credit on the date required, as
specified above, but no Participant shall be responsible for the failure of any
other Participant to make available to the Agent for the account of such Letter
of Credit Issuer such other Participant's RL Percentage of any such payment.
(d) Whenever any Letter of Credit Issuer receives a payment of a
reimbursement obligation as to which the Agent has received for the account of
such Letter of Credit Issuer any payments from the Participants pursuant to
clause (c) above, such Letter of Credit Issuer shall promptly pay to the Agent
and the Agent shall promptly pay to each Participant which has paid its RL
Percentage thereof, in U.S. Dollars and in same day funds, an amount equal to
such Participant's RL Percentage of the principal amount thereof and interest
thereon accruing after the purchase of the respective participations.
(e) The obligations of the Participants to make payments to the Agent
for the account of the respective Letter of Credit Issuer with respect to
Letters of Credit issued by it shall be irrevocable and not subject to
counterclaim, set-off or other defense or any other qualification or exception
whatsoever and shall be made in accordance with the terms and conditions of this
Agreement under all circumstances, including, without limitation, any of the
following circumstances:
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<PAGE>
(i) any lack of validity or enforceability of this Agreement or
any of the other Credit Documents;
(ii) the existence of any claim, set-off, defense or other right
which the Borrower may have at any time against a beneficiary named in a
Letter of Credit, any transferee of any Letter of Credit (or any Person for
whom any such transferee may be acting), the Agent, any Letter of Credit
Issuer, any Bank, or other Person, whether in connection with this
Agreement, any Letter of Credit, the transactions contemplated herein or
any unrelated transactions (including any underlying transaction between
the Borrower or any of its Subsidiaries and the beneficiary named in any
such Letter of Credit);
(iii) any draft, certificate or other document presented under the
Letter of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Credit
Documents; or
(v) the occurrence of any Default or Event of Default.
2.05 Increased Costs. If after the date hereof, the adoption or
---------------
effectiveness of any applicable law, rule or regulation, or any change therein,
or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Letter of Credit
Issuer or any Participant with any request or directive (whether or not having
the force of law) by any such authority, central bank or comparable agency shall
either (i) impose, modify or make applicable any reserve, deposit, capital
adequacy or similar requirement against Letters of Credit issued by such Letter
of Credit Issuer or such Participant's participation therein, or (ii) impose on
any Letter of Credit Issuer or any Participant any other conditions affecting
this Agreement, any Letter of Credit or such Participant's participation
therein; and the result of any of the foregoing is to increase the cost to such
Letter of Credit Issuer or such Participant of issuing, maintaining or
participating in any Letter of Credit, or to reduce the amount of any sum
received or receivable by such Letter of Credit Issuer or such Participant
hereunder, then, upon written demand to the Borrower by such Letter of Credit
Issuer or such Participant (a copy of which notice shall be sent by such Letter
of Credit Issuer or such Participant to the Agent), accompanied by the
certificate described in the last sentence of this Section 2.05, the Borrower
shall pay to such Letter of Credit Issuer or such Participant such additional
amount or amounts as will compensate such Letter of Credit Issuer or such
Participant for such increased cost or reduction. A certificate submitted to
the Borrower by such Letter of Credit Issuer or such Participant, as the case
may be (a copy of which certificate shall be sent by such Letter of Credit
Issuer or such Participant to the Agent), setting forth the basis for the
determination of such additional amount or amounts necessary to compensate such
Letter of Credit Issuer or such Participant as aforesaid shall be final and
conclusive and binding
-18-
<PAGE>
on the Borrower absent manifest error, although the failure to deliver
any such certificate shall not release or diminish the Borrower's obligations to
pay additional amounts pursuant to this Section 2.05 upon subsequent receipt of
such certificate.
SECTION 3. Fees; Commitments.
-----------------
3.01 Fees. (a) The Borrower shall pay to the Agent for distribution
----
to each Bank a commitment fee (the "Commitment Fee") for the period from the
Effective Date to but not including the date the Total Commitment has been
terminated, computed at a rate for each day equal to the Applicable Commitment
Fee Percentage on the daily Aggregate Unutilized Commitment of such Bank.
Accrued Commitment Fees shall be due and payable in arrears on each Quarterly
Payment Date and the date upon which the Total Revolving Loan Commitment is
terminated.
(b) The Borrower shall pay to the Agent for the account of the RL
Banks pro rata on the basis of their RL Percentages, a fee in respect of each
--- ----
Letter of Credit (the "Letter of Credit Fee") computed at a rate per annum equal
to the Applicable Eurodollar Margin then in effect with respect to Revolving
Loans on the daily Stated Amount of such Letter of Credit. Accrued Letter of
Credit Fees shall be due and payable quarterly in arrears on each Quarterly
Payment Date and upon the first day after the termination of the Total Revolving
Loan Commitment upon which no Letters of Credit remain outstanding.
(c) The Borrower shall pay to the Agent for the account of the
respective Letter of Credit Issuer a fee in respect of each Letter of Credit
issued by such Letter of Credit Issuer (the "Facing Fee") computed at the rate
of 1/4 of 1% per annum on the daily Stated Amount of such Letter of Credit;
provided, that in no event shall the annual Facing Fee with respect to each
- --------
Letter of Credit be less than $500; it being agreed that, on the date of
issuance of any Letter of Credit and on each anniversary thereof prior to the
termination of such Letter of Credit, if $500 will exceed the amount of Facing
Fees that will accrue with respect to such Letter of Credit for the immediately
succeeding 12-month period, the full $500 shall be payable on the date of
issuance of such Letter of Credit and on each such anniversary thereof prior to
the termination of such Letter of Credit. Except as provided in the immediately
preceding sentence, accrued Facing Fees shall be due and payable quarterly in
arrears on each Quarterly Payment Date and upon the first day after the
termination of the Total Revolving Loan Commitment upon which no Letters of
Credit remain outstanding.
(d) The Borrower hereby agrees to pay directly to the respective
Letter of Credit Issuer upon each issuance of, payment under, and/or amendment
of, a Letter of Credit issued by it such amount as shall at the time of such
issuance, payment or amendment be the administrative charge which such Letter of
Credit Issuer is customarily charging for issuances of, payments under or
amendments of, letters of credit issued by it.
(e) The Borrower shall pay to the Agent, for its own account, such
fees as may be agreed to from time to time between the Borrower and the Agent,
when and as due.
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<PAGE>
(f) All computations of Fees shall be made in accordance with
Section 12.07(b).
3.02 Voluntary Termination or Reduction of Total Unutilized Revolving
----------------------------------------------------------------
Loan Commitment. (a) Upon at least two Business Days' prior written notice (or
- ---------------
telephonic notice promptly confirmed in writing) to the Agent at its Notice
Office (which notice the Agent shall promptly transmit to each of the Banks),
the Borrower shall have the right, without premium or penalty, to terminate or
partially reduce the Total Unutilized Revolving Loan Commitment; provided that
--------
(x) any such termination or partial reduction shall apply to proportionately and
permanently reduce the Revolving Loan Commitment of each of the RL Banks and (y)
any partial reduction pursuant to this Section 3.02(a) shall be in the amount of
at least $1,000,000.
(b) In the event of certain refusals by a Bank to consent to certain
proposed changes, waivers, discharges or terminations with respect to this
Agreement which have been approved by the Required Banks as provided in Section
12.12(b), the Borrower shall have the right, upon five Business Days' prior
written notice to the Agent at its Notice Office (which notice the Agent shall
promptly transmit to each of the Banks), to terminate the entire Revolving Loan
Commitment of such Bank, so long as all Loans, together with accrued and unpaid
interest, Fees and all other amounts, due and owing to such Bank are repaid
concurrently with the effectiveness of such termination pursuant to Section
4.01(b) and the Borrower shall pay to the Agent at such time an amount in cash
and/or Cash Equivalents equal to such Bank's RL Percentage of the outstanding
Letters of Credit (which cash and/or Cash Equivalents shall be held by the Agent
as security for the obligations of the Borrower hereunder in respect of the
outstanding Letters of Credit pursuant to a cash collateral agreement to be
entered into in form and substance reasonably satisfactory to the Agent, which
shall permit certain investments in Cash Equivalents reasonably satisfactory to
the Agent until the proceeds are applied to the secured obligations) (at which
time Annex I shall be deemed modified to reflect such changed amounts), and at
such time, such Bank shall no longer constitute a "Bank" for purposes of this
Agreement, except with respect to indemnifications under this Agreement
(including, without limitation, Sections 1.10, 1.11, 2.05, 4.04, 12.01 and
12.06), which shall survive as to such repaid Bank.
3.03 Mandatory Adjustments of Commitments, etc. (a) The Total
------------------------------------------
Commitment shall terminate in its entirety on September 30, 1996 unless the
Initial Borrowing Date has occurred on or before such date.
(b) Each of the Total A Term Loan Commitment and Total B Term Loan
Commitment shall terminate on the Initial Borrowing Date, after giving effect to
the making of Term Loans on such date.
(c) The Total Revolving Loan Commitment (and the Revolving Loan
Commitment of each Bank) shall terminate on the earlier of (x) the date on which
a Change of Control Event occurs and (y) the Revolving Loan Maturity Date.
-20-
<PAGE>
(d) On each date upon which a mandatory repayment of Term Loans
pursuant to Section 4.02(A)(c), (d), (e), (f), (g) or (h) is required (and
exceeds in amount the aggregate principal amount of Term Loans then outstanding)
or would be required if an unlimited amount of Term Loans were then outstanding,
the Total Revolving Loan Commitment shall be permanently reduced by the amount,
if any, by which the amount required to be applied pursuant to said Sections
(determined as if an unlimited amount of Term Loans were actually outstanding)
exceeds the aggregate principal amount of Term Loans then outstanding.
Notwithstanding anything to the contrary contained in the immediately preceding
sentence, in no event shall the Total Revolving Loan Commitment be reduced to an
amount less than $15,000,000 pursuant to or as a result of this Section 3.03(d).
(e) Each reduction or adjustment of the Total A Term Loan Commitment,
the Total B Term Loan Commitment or the Total Revolving Loan Commitment pursuant
to this Section 3.03 (or pursuant to Section 4.02) shall apply proportionately
to the A Term Loan Commitment, the B Term Loan Commitment or the Revolving Loan
Commitment, as the case may be, of each Bank with such a Commitment.
SECTION 4. Payments.
--------
4.01 Voluntary Prepayments. (a) The Borrower shall have the right
---------------------
to prepay the Loans made to it, in whole or in part, without premium or penalty,
except as otherwise provided in this Agreement, from time to time on the
following terms and conditions: (i) the Borrower shall give the Agent at its
Notice Office written notice (or telephonic notice promptly confirmed in
writing) of its intent to prepay such Loans, whether such Loans are A Term
Loans, B Term Loans, Revolving Loans or Swingline Loans, the amount of such
prepayment and (in the case of Eurodollar Loans) the specific Borrowing(s)
pursuant to which made, which notice shall be given by the Borrower prior to
11:00 A.M. (New York time) (x) at least one Business Day prior to the date of
such prepayment in the case of Term Loans or Revolving Loans maintained as Base
Rate Loans, (y) on the date of such prepayment in the case of Swingline Loans
and (z) at least three Business Days prior to the date of such prepayment in the
case of Eurodollar Loans, which notice shall, except in the case of Swingline
Loans, promptly be transmitted by the Agent to each of the Banks; (ii) each
prepayment shall be in an aggregate principal amount of (A) at least $1,000,000
in the case of Eurodollar Loans and (B) at least $500,000 in the case of Base
Rate Loans (or $100,000 in the case of Swingline Loans); provided, that no
--------
partial prepayment of Eurodollar Loans made pursuant to a Borrowing shall reduce
the aggregate principal amount of the Eurodollar Loans outstanding pursuant to
such Borrowing to an amount less than the Minimum Borrowing Amount applicable
thereto; (iii) each prepayment in respect of any Loans made pursuant to a
Borrowing shall be applied pro rata among such Loans; provided, that at the
--- ---- --------
Borrower's election in connection with any prepayment of Revolving Loans
pursuant to this Section 4.01, such prepayment shall not be applied to any
Revolving Loans of a Defaulting Bank at any time when the aggregate amount of
Revolving Loans of any Non-Defaulting Bank exceeds such Non-Defaulting Bank's RL
Percentage of all Revolving Loans then outstanding; (iv) each prepayment of Term
Loans pursuant to this Section 4.01 must consist of a prepayment of A Term Loans
(in an amount
-21-
<PAGE>
equal to the A TL Percentage of such prepayment) and B Term Loans (in an amount
equal to the B TL Percentage of such prepayment); (v) each prepayment of A Term
Loans pursuant to this Section 4.01 shall reduce the then remaining Scheduled A
Repayments on a pro rata basis (based upon the then remaining principal amount
--- ----
of each suchScheduled A Repayment); and (vi) each prepayment of B Term Loans
pursuant to this Section 4.01 shall reduce the then remaining Scheduled B
Repayments on a pro rata basis (based upon the then remaining principal amount
--- ----
of each such Scheduled B Repayment).
(b) In the event of certain refusals by a Bank to consent to certain
proposed changes, waivers, discharges or terminations with respect to this
Agreement which have been approved by the Required Banks as provided in Section
12.12(b), the Borrower shall have the right, upon five Business Days' prior
written notice to the Agent at its Notice Office (which notice the Agent shall
promptly transmit to each of the Banks) to repay all Loans, together with
accrued and unpaid interest, Fees and all other amounts due and owing to such
Bank in accordance with said Section 12.12(b), so long as (A) in the case of the
repayment of Revolving Loans of any RL Bank pursuant to this clause (b), the
Revolving Loan Commitment of such RL Bank is terminated concurrently with such
repayment pursuant to Section 3.02(b) (at which time Annex I shall be deemed
modified to reflect the changed Revolving Loan Commitments) and (B) in the case
of the repayment of Loans of any Bank, the consents required by Section 12.12(b)
in connection with the repayment pursuant to this clause (b) shall have been
obtained.
4.02 Mandatory Prepayments.
---------------------
(A) Requirements:
------------
(a) If on any date the sum of (i) the aggregate outstanding principal
amount of Revolving Loans and Swingline Loans (after giving effect to all other
repayments thereof on such date) plus (ii) the Letter of Credit Outstandings on
such date exceeds the Total Revolving Loan Commitment as then in effect, the
Borrower shall repay on such date the principal of Swingline Loans, and if no
Swingline Loans are or remain outstanding, Revolving Loans, in an aggregate
amount equal to such excess. If, after giving effect to the prepayment of all
outstanding Swingline Loans and Revolving Loans, the aggregate amount of Letter
of Credit Outstandings exceeds the Total Revolving Loan Commitment as then in
effect, the Borrower agrees to pay to the Agent an amount in cash and/or Cash
Equivalents equal to such excess (up to the aggregate amount of Letter of Credit
Outstandings at such time) and the Agent shall hold such payment as security for
the obligations of the Borrower hereunder pursuant to a cash collateral
agreement to be entered into in form and substance reasonably satisfactory to
the Agent (which shall permit certain investments in Cash Equivalents reasonably
satisfactory to the Agent until the proceeds are applied to the secured
obligations).
(b) (i) The Borrower shall be required to repay the principal amount
of A Term Loans on each date set forth below in the amount set forth opposite
such date below (each such
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<PAGE>
repayment, as the same may be reduced as provided in Sections 4.01 and 4.02(B),
a "Scheduled A Repayment"):
<TABLE>
<CAPTION>
Scheduled A Repayment Date Amount
-------------------------- ------
<S> <C>
the last Business Day in November, 1997 $1,000,000
the last Business Day in February, 1998 $1,000,000
the last Business Day in May, 1998 $1,000,000
the last Business Day in August, 1998 $1,000,000
the last Business Day in November, 1998 $2,500,000
the last Business Day in February, 1999 $2,500,000
the last Business Day in May, 1999 $2,500,000
the last Business Day in August, 1999 $2,500,000
the last Business Day in November, 1999 $2,500,000
the last Business Day in February, 2000 $2,500,000
the last Business Day in May, 2000 $2,500,000
the last Business Day in August, 2000 $2,500,000
the last Business Day in November, 2000 $2,500,000
the last Business Day in February, 2001 $2,500,000
the last Business Day in May, 2001 $2,500,000
the last Business Day in August, 2001 $2,500,000
the last Business Day in November, 2001 $5,500,000
A Term Loan Maturity Date $5,500,000
</TABLE>
(ii) The Borrower shall be required to repay the principal amount
of B Term Loans on each date set forth below in the amount set forth opposite
such date below (each such repayment, as the same may be reduced as provided in
Sections 4.01 and 4.02(B), a "Scheduled B Repayment"):
<TABLE>
<CAPTION>
Scheduled B Repayment Date Amount
-------------------------- ------
<S> <C>
the last Business Day in November, 1996 $ 125,000
the last Business Day in February, 1997 $ 125,000
the last Business Day in May, 1997 $ 125,000
the last Business Day in August, 1997 $ 125,000
the last Business Day in November, 1997 $ 125,000
the last Business Day in February, 1998 $ 125,000
</TABLE>
-23-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
the last Business Day in May, 1998 $ 125,000
the last Business Day in August, 1998 $ 125,000
the last Business Day in November, 1998 $ 125,000
the last Business Day in February, 1999 $ 125,000
the last Business Day in May, 1999 $ 125,000
the last Business Day in August, 1999 $ 125,000
the last Business Day in November, 1999 $ 125,000
the last Business Day in February, 2000 $ 125,000
the last Business Day in May, 2000 $ 125,000
the last Business Day in August, 2000 $ 125,000
the last Business Day in November, 2000 $ 125,000
the last Business Day in February, 2001 $ 125,000
the last Business Day in May, 2001 $ 125,000
the last Business Day in August, 2001 $ 125,000
the last Business Day in November, 2001 $ 125,000
the last Business Day in February, 2002 $ 125,000
the last Business Day in May, 2002 $4,000,000
the last Business Day in August, 2002 $4,000,000
the last Business Day in November, 2002 $4,000,000
the last Business Day in February, 2003 $4,000,000
the last Business Day in May, 2003 $6,000,000
the last Business Day in August, 2003 $6,000,000
the last Business Day in November, 2003 $9,625,000
B Term Loan Maturity Date $9,625,000
</TABLE>
(c) On the Business Day after the date of receipt thereof by Holdings
and/or any of its Subsidiaries of Proceeds from any Asset Sale, an amount equal
to 100% of the Net Proceeds from such Asset Sale shall be applied as a mandatory
repayment of principal of the Term Loans (with the A TL Percentage of such
amount to be applied as a repayment of the A Term Loans and the B TL Percentage
of such amount to be applied as a repayment of the B Term Loans, in each case
subject to modification of such application as set forth in Section 4.02(C)),
provided that with respect to no more than (x) $5,000,000 in the aggregate of
- --------
the Net Proceeds received in connection with any West Coast Asset Sale and
(y) $1,000,000 in the aggregate of the Net Proceeds received in connection with
all other Asset Sales in any fiscal year of the Borrower, the Net Proceeds
therefrom shall not be required to be so applied on such date to the extent that
no payment Default, or Event of Default, then exists and the Borrower delivers a
certificate to the Agent on or prior to such date stating that such Net Proceeds
shall be used to purchase assets used or to be used in the businesses referred
to in Section 8.01(a)
-24-
<PAGE>
(including, without limitation, capital stock of a corporation engaged in any
such business) within 180 days following the date of such Asset Sale (which
certificate shall set forth the estimates of the proceeds to be so expended),
provided, that (1) if all or any portion of such Net Proceeds not so applied to
- --------
the repayment of Term Loans are not so used (or contractually committed to be
used) within such 180 day period, such remaining portion shall be applied on the
last day of such period as a mandatory repayment of principal of outstanding
Term Loans as provided above in this Section 4.02(A)(c) and (2) if all or any
portion of such Net Proceeds are not required to be applied on the 180th day
referred to in clause (1) above because such amount is contractually committed
to be used and subsequent to such date such contract is terminated or expires
without such portion being so used, then such remaining portion shall be applied
on the date of such termination or expiration as a mandatory repayment of
principal of outstanding Term Loans as provided in this Section 4.02(A)(c).
(d) On the Business Day after the date of the receipt thereof by
Holdings and/or any of its Subsidiaries, an amount equal to 100% of the cash
proceeds (net of underwriting discounts, fees and commissions and other costs
and expenses associated therewith) of the sale or issuance of preferred or
common equity of (or cash capital contributions to) Holdings or any of its
Subsidiaries (other than (w) issuances of Holdings Common Stock and Permitted
Holdings PIK Securities by Holdings as consideration in connection with any
Permitted Acquisition, (x) issuances of Holdings Common Stock or Holdings Class
L Common Stock (including as a result of the exercise of any options with regard
thereto) to employees, directors and management of Holdings and its Subsidiaries
and (y) equity contributions to any Subsidiary of the Borrower made by the
Borrower or any other Subsidiary of the Borrower) shall be applied as a
mandatory repayment of principal of the Term Loans (with the A TL Percentage of
such amount to be applied as a repayment of the A Term Loans and the B TL
Percentage of such amount to be applied as a repayment of the B Term Loans, in
each case subject to modification of such application as set forth in Section
4.02(C)); provided that (i) $10,000,000 of cash equity contributions in the
--------
aggregate from Bain Capital or any Related Party shall not be required to be
applied as provided above in this Section 4.02(A)(d) so long as such equity
contributions are substantially contemporaneously contributed to the capital of
the Borrower as an equity contribution or loaned to the Borrower (such loan to
be evidenced by the Borrower Subordinated Note) (the cash contributions made
pursuant to this clause (i), "Permitted Equity Proceeds"), and (ii) only the
Applicable Equity/ECF Percentage of such proceeds resulting from a registered
public offering of Holdings Common Stock, or the issuance of Holdings common
stock pursuant to a Permitted Strategic Equity Issuance, shall be applied as
provided above in this Section 4.02(A)(d).
(e) On the date of the receipt thereof by Holdings and/or any of its
Subsidiaries, an amount equal to 100% of the proceeds (net of underwriting
discounts, fees and commissions and other costs and expenses associated
therewith) of the incurrence of Indebtedness by Holdings and/or any of its
Subsidiaries (other than Indebtedness permitted to be incurred by Section 8.04
as in effect on the Effective Date) shall be applied as a mandatory repayment of
principal of the Term Loans (with the A TL Percentage of such amount to be
applied as a repayment of the A Term Loans and the B TL Percentage of such
amount to be
-25-
<PAGE>
applied as a repayment of the B Term Loans, in each case subject to modification
of such application as set forth in Section 4.02(C)).
(f) On each Excess Cash Payment Date, an amount equal to the
Applicable Equity/ECF Percentage of Excess Cash Flow of the Borrower and its
Subsidiaries for the most recent Excess Cash Flow Period ending prior to such
Excess Cash Payment Date shall be applied as a mandatory repayment of principal
of the Term Loans (with the A TL Percentage of such amount to be applied as a
repayment of the A Term Loans and the B TL Percentage of such amount to be
applied as a repayment of the B Term Loans, in each case subject to modification
of such application as set forth in Section 4.02(C)).
(g) Within 10 days following each date on which Holdings or any of
its Subsidiaries receives any proceeds from any Recovery Event, an amount equal
to 100% of the proceeds of such Recovery Event (net of costs, expenses and taxes
incurred in connection with such Recovery Event) shall be applied as a mandatory
repayment of principal of the Term Loans (with the A TL Percentage of such
amount to be applied as a repayment of the A Term Loans and the B TL Percentage
of such amount to be applied as a repayment of the B Term Loans, in each case
subject to modification of such application as set forth in Section 4.02(C)),
provided that so long as no Default or Event of Default then exists and such
- --------
proceeds do not exceed $25,000,000, such proceeds shall not be required to be so
applied on such date to the extent that the Borrower has delivered a certificate
to the Agent on or prior to such date stating that such proceeds shall be used
to replace or restore any properties or assets in respect of which such proceeds
were paid within 360 days following the date of the receipt of such proceeds
(which certificate shall set forth the estimates of the proceeds to be so
expended), and provided further, that (i) if the amount of such proceeds exceeds
----------------
$25,000,000, then the entire amount and not just the portion in excess of
$25,000,000 shall be applied as a mandatory repayment of Term Loans as provided
above in this Section 4.02(A)(g), (ii) if all or any portion of such proceeds
not required to be applied to the repayment of Term Loans pursuant to the
preceding proviso are not so used (or contractually committed to be used) within
360 days after the date of the receipt of such proceeds, such remaining portion
shall be applied on the last day of such period as a mandatory repayment of
principal of the Term Loans as provided in this Section 4.02(A)(g) and (iii) if
all or any portion of such proceeds are not required to be applied on the 360th
day referred to in clause (ii) above because such amount is contractually
committed to be used and subsequent to such date such contract is terminated or
expires without such portion being so used, then such remaining portion shall be
applied on the date of such termination or expiration as a mandatory repayment
of principal of outstanding Term Loans as provided in this Section 4.02(A)(g).
(h) On the date of the receipt thereof by Holdings and/or any of its
Subsidiaries of a Pension Plan Refund, an amount equal to 100% of such Pension
Plan Refund shall be applied as a mandatory repayment of principal of Term Loans
(with the A TL Percentage of such amount to be applied as a repayment of the A
Term Loans, and the B TL Percentage of such amount to be applied as a repayment
of the B Term Loans, in each case subject to modification of such application as
set forth in Section 4.02(C)).
-26-
<PAGE>
(B) Application:
-----------
(a) Any amount required to be applied to A Term Loans or B Term
Loans, as the case may be, shall apply to the repayment of the outstanding
principal amount of A Term Loans or B Term Loans, respectively.
(b) All repayments of A Term Loans or B Term Loans, shall be applied
to reduce the then remaining Scheduled Repayments of the respective Facility pro
---
rata based on the then remaining Scheduled Repayments of the respective
- ----
Facility.
(c) With respect to each repayment of Loans required by this Section
4.02, the Borrower may designate the Types of Loans which are to be repaid and
the specific Borrowing(s) under the affected Facility pursuant to which made;
provided, that (i) Eurodollar Loans made pursuant to a specific Facility may be
- --------
designated for repayment pursuant to this Section 4.02 only on the last day of
an Interest Period applicable thereto unless all Eurodollar Loans made pursuant
to such Facility with Interest Periods ending on such date of required
prepayment and all Base Rate Loans made pursuant to such Facility have been
paid in full; (ii) if any repayment of Eurodollar Loans made pursuant to a
single Borrowing shall reduce the outstanding Loans made pursuant to such
Borrowing to an amount less than the Minimum Borrowing Amount, such Borrowing
shall be immediately converted into Base Rate Loans; and (iii) each repayment of
any Loans made pursuant to a Borrowing shall be applied pro rata among such
--- ----
Loans; provided, that no repayment pursuant to Section 4.02(A)(a) shall be
--------
applied to any Revolving Loans of a Defaulting Bank at any time when the
aggregate amount of the Revolving Loans of any Non-Defaulting Bank exceeds such
Non-Defaulting Bank's RL Percentage of Revolving Loans then outstanding. In the
absence of a designation by the Borrower as described in the preceding sentence,
the Agent shall, subject to the above, make such designation in its sole
discretion with a view, but no obligation, to minimize breakage costs owing
under Section 1.11.
(C) Waiver of Certain Mandatory Repayments by B Banks:
-------------------------------------------------
Notwithstanding anything to the contrary contained in this Section
4.02 or elsewhere in this Agreement (including, without limitation, in Section
12.12), the Borrower shall have the option, in its sole discretion, to give the
Banks with outstanding B Terms Loans (the "B Banks") the option to waive a
mandatory repayment of such Loans pursuant to Section 4.02(A)(c), (d), (e), (f),
(g) and/or (h) (each such repayment, a "Waivable Mandatory Repayment") upon the
terms and provisions set forth in this Section 4.02(C). If the Borrower elects
to exercise the option referred to in the preceding sentence, the Borrower shall
give to the Agent written notice of its intention to give the B Banks the right
to waive a Waivable Mandatory Repayment at least five Business Days prior to
such repayment, which notice the Agent shall promptly forward to all B Banks
(indicating in such notice the amount of such repayment to be applied to each
such Bank's outstanding Term Loans under such Facility). The Borrower's offer
to permit such Banks to waive any such Waivable Mandatory Repayment may apply to
all or part of such repayment, provided that any offer to waive part of such
--------
repayment
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<PAGE>
must be made ratably to such Banks on the basis of their outstanding B
Term Loans. In the event any such B Bank desires to waive such Bank's right to
receive any such Waivable Mandatory Repayment in whole or in part, such Bank
shall so advise the Agent no later than the close of business two Business Days
after the date of such notice from the Agent, which notice shall also include
the amount such Bank desires to receive in respect of such repayment. If any
Bank does not reply to the Agent within the two Business Days, it will be deemed
not to have waived any part of such repayment. If any Bank does not specify an
amount it wishes to receive, it will be deemed to have accepted 100% of the
total payment. In the event that any such Bank waives all or part of such right
to receive any such Waivable Mandatory Repayment, the Agent shall apply 100% of
the amount so waived by such Bank to the A Term Loans in accordance with Section
4.02(B).
4.03 Method and Place of Payment. Except as otherwise specifically
---------------------------
provided herein, all payments under this Agreement shall be made to the Agent
for the ratable account of the Banks entitled thereto, not later than 12:00 Noon
(New York time) on the date when due and shall be made in immediately available
funds and in U.S. Dollars at the Payment Office, it being understood that
written, telex or facsimile transmission notice by the Borrower to the Agent to
make a payment from the funds in the Borrower's account at the Payment Office
shall constitute the making of such payment to the extent of such funds held in
such account. Any payments under this Agreement which are made later than 12:00
Noon (New York time) shall be deemed to have been made on the next succeeding
Business Day. Whenever any payment to be made hereunder shall be stated to be
due on a day which is not a Business Day, the due date thereof shall be extended
to the next succeeding Business Day and, with respect to payments of principal,
interest shall be payable during such extension at the applicable rate in effect
immediately prior to such extension.
4.04 Net Payments. (a) All payments made by the Borrower hereunder
------------
or under any Note will be made without setoff, counterclaim or other defense.
Except as provided in Section 4.04(b), all such payments will be made free and
clear of, and without deduction or withholding for, any present or future taxes,
levies, imposts, duties, fees, assessments or other charges of whatever nature
now or hereafter imposed by any jurisdiction or by any political subdivision or
taxing authority thereof or therein with respect to such payments (but
excluding, except as provided in the second succeeding sentence, any tax imposed
on or measured by the net income or net profits of a Bank pursuant to the laws
of the jurisdiction in which it is organized or the jurisdiction in which the
principal office or applicable lending office of such Bank is located or any
subdivision thereof or therein) and all interest, penalties or similar
liabilities with respect thereto (all such non-excluded taxes, levies, imposts,
duties, fees, assessments or other charges being referred to collectively as
"Taxes"). If any Taxes are so levied or imposed, the Borrower agrees to pay the
full amount of such Taxes, and such additional amounts as may be necessary so
that every payment of all amounts due under this Agreement or under any Note,
after withholding or deduction for or on account of any Taxes, will not be less
than the amount provided for herein or in such Note. If any amounts are payable
in respect of Taxes pursuant to the preceding sentence, the Borrower agrees to
reimburse each Bank, upon the written request of such Bank, for taxes imposed on
or measured
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<PAGE>
by the net income or net profits of such Bank pursuant to the laws
of the jurisdiction in which the principal office or applicable lending office
of such Bank is located or under the laws of any political subdivision or taxing
authority of any such jurisdiction in which the principal office or applicable
lending office of such Bank is located and for any withholding of taxes as such
Bank shall determine are payable by, or withheld from, such Bank in respect of
such amounts so paid to or on behalf of such Bank pursuant to the preceding
sentence and in respect of any amounts paid to or on behalf of such Bank
pursuant to this sentence. The Borrower will furnish to the Agent within 45
days after the date the payment of any Taxes is due pursuant to applicable law
certified copies of tax receipts evidencing such payment by the Borrower. The
Borrower agrees to indemnify and hold harmless each Bank, and reimburse such
Bank upon its written request, for the amount of any Taxes so levied or imposed
and paid by such Bank.
(b) Each Bank that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) agrees to deliver to the Borrower
and the Agent on or prior to the Effective Date, or in the case of a Bank that
is an assignee or transferee of an interest under this Agreement pursuant to
Section 1.13 or 12.04 (unless the respective Bank was already a Bank hereunder
immediately prior to such assignment or transfer), on the date of such
assignment or transfer to such Bank, (i) two accurate and complete original
signed copies of Internal Revenue Service Form 4224 or 1001 (or successor forms)
certifying to such Bank's entitlement to a complete exemption from United States
withholding tax with respect to payments to be made under this Agreement and
under any Note, or (ii) if the Bank is not a "bank" within the meaning of
Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue
Service Form 1001 or 4224 pursuant to clause (i) above, (x) a certificate
substantially in the form of Exhibit C (any such certificate, a "Section
4.04(b)(ii) Certificate") and (y) two accurate and complete original signed
copies of Internal Revenue Service Form W-8 (or successor form) certifying to
such Bank's entitlement to a complete exemption from United States withholding
tax with respect to payments of interest to be made under this Agreement and
under any Note. In addition, each Bank agrees that from time to time after the
Effective Date, when a lapse in time or change in circumstances renders the
previous certification obsolete or inaccurate in any material respect, it will
deliver to the Borrower and the Agent two new accurate and complete original
signed copies of Internal Revenue Service Form 4224 or 1001, or Form W-8 and a
Section 4.04(b)(ii) Certificate, as the case may be, and such other forms as may
be required in order to confirm or establish the entitlement of such Bank to a
continued exemption from or reduction in United States withholding tax with
respect to payments under this Agreement and any Note, or it shall immediately
notify the Borrower and the Agent of its inability to deliver any such Form or
Certificate. Notwithstanding anything to the contrary contained in Section
4.04(a), but subject to Section 12.04(b) and the immediately succeeding
sentence, (x) the Borrower shall be entitled, to the extent it is required to do
so by law, to deduct or withhold income or similar taxes imposed by the United
States (or any political subdivision or taxing authority thereof or therein)
from interest, fees or other amounts payable hereunder for the account of any
Bank which is not a United States person (as such term is defined in Section
7701(a)(30) of the Code) for U.S. Federal income tax purposes to the extent that
such Bank has not provided to the Borrower U.S. Internal Revenue Service Forms
that establish a complete exemption from such deduction or withholding and (y)
the
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<PAGE>
Borrower shall not be obligated pursuant to Section 4.04(a) hereof to gross-
up payments to be made to a Bank in respect of income or similar taxes imposed
by the United States if (I) such Bank has not provided to the Borrower the
Internal Revenue Service Forms required to be provided to the Borrower pursuant
to this Section 4.04(b) or (II) in the case of a payment, other than interest,
to a Bank described in clause (ii) above, to the extent that such Forms do not
establish a complete exemption from withholding of such taxes. Notwithstanding
anything to the contrary contained in the preceding sentence or elsewhere in
this Section 4.04 and except as set forth in Section 12.04(b), the Borrower
agrees to pay additional amounts and to indemnify each Bank in the manner set
forth in Section 4.04(a) (without regard to the identity of the jurisdiction
requiring the deduction or withholding) in respect of any amounts deducted or
withheld by it as described in the immediately preceding sentence as a result of
any changes after the Effective Date in any applicable law, treaty, governmental
rule, regulation, guideline or order, or in the interpretation thereof, relating
to the deducting or withholding of income or similar Taxes.
SECTION 5. Conditions Precedent. The obligation of each Bank to make
--------------------
each Loan to the Borrower hereunder, and the obligation of any Letter of Credit
Issuer to issue each Letter of Credit hereunder, is subject, at the time of each
such Credit Event (except as otherwise hereinafter indicated), to the
satisfaction of the following conditions:
5.01 Execution of Agreement; Notes. On or prior to the Initial
-----------------------------
Borrowing Date, (i) the Effective Date shall have occurred and (ii) there shall
have been delivered to the Agent for the account of each Bank the appropriate A
Term Note, B Term Note and Revolving Note, if any, and to BTCo the Swingline
Note, in each case executed by the Borrower and in the amount, maturity and as
otherwise provided herein.
5.02 No Default; Representations and Warranties. At the time of each
------------------------------------------
Credit Event and also after giving effect thereto (i) there shall exist no
Default or Event of Default and (ii) all representations and warranties
contained herein or in the other Credit Documents in effect at such time shall
be true and correct in all material respects with the same effect as though such
representations and warranties had been made on and as of the date of such
Credit Event, unless stated to relate to a specific earlier date, in which case
such representations and warranties shall be true and correct in all material
respects as of such earlier date.
5.03 Officer's Certificate. On the Initial Borrowing Date, the Agent
---------------------
shall have received a certificate dated such date signed by an appropriate
officer of the Borrower stating that all of the applicable conditions set forth
in Sections 5.02, 5.07, 5.08 and 5.09 have been satisfied as of such date.
5.04 Opinions of Counsel. On the Initial Borrowing Date, the Agent
-------------------
shall have received opinions, addressed to the Agent and each of the Banks and
dated the Initial Borrowing Date, from (i) Kirkland & Ellis, counsel to the
Credit Parties, which opinion shall cover the matters contained in Exhibit D and
such other matters incident to the transactions contemplated herein as the Agent
may reasonably request and (ii) local counsel and other
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<PAGE>
counsel to the Credit Parties and/or the Agent reasonably satisfactory to the
Agent (including, without limitation, McConnell Valdes, as special Puerto Rico
counsel to the Credit Parties), which opinions shall cover such matters incident
to the transactions contemplated herein and in the other Credit Documents as the
Agent may reasonably request and shall be in form and substance reasonably
satisfactory to the Agent.
5.05 Corporate Proceedings. (a) On the Initial Borrowing Date, the
---------------------
Agent shall have received from each Credit Party a certificate, dated the
Initial Borrowing Date, signed by the chairman, a vice chairman, the president
or any vice-president of such Credit Party, and attested to by the secretary or
any assistant secretary of such Credit Party, in the form of Exhibit E with
appropriate insertions, together with copies of the Certificate of Incorporation
and By-Laws of such Credit Party and the resolutions of such Credit Party
referred to in such certificate and all of the foregoing (including each such
Certificate of Incorporation and By-Laws) shall be reasonably satisfactory to
the Agent.
(b) On the Initial Borrowing Date, all corporate and legal
proceedings and all instruments and agreements in connection with the
transactions contemplated by this Agreement and the other Documents shall be
reasonably satisfactory in form and substance to the Agent, and the Agent shall
have received all information and copies of all certificates, documents and
papers, including good standing certificates, bring-down certificates and any
other records of corporate proceedings and governmental approvals, if any, which
the Agent reasonably may have requested in connection therewith, such documents
and papers, where appropriate, to be certified by proper corporate or
governmental authorities.
(c) On the Initial Borrowing Date, the ownership and capital
structure (including, without limitation, the terms of any capital stock,
options, warrants or other securities issued by Holdings or any of its
Subsidiaries) and management of Holdings and its Subsidiaries shall be in form
and substance satisfactory to the Agent and the Required Banks.
5.06 Adverse Change, etc. On or prior to the Initial Borrowing Date,
--------------------
nothing shall have occurred since March 31, 1996 (and neither the Banks nor the
Agent shall have become aware of any facts or conditions not previously known)
which the Required Banks or the Agent shall determine (a) has, or could
reasonably be expected to have, a material adverse effect on the rights or
remedies of the Banks or the Agent, or on the ability of any Credit Party to
perform its obligations to them hereunder or under any other Credit Document or
(b) has, or could reasonably be expected to have, a Material Adverse Effect.
5.07 Litigation. On the Initial Borrowing Date, there shall be no
----------
actions, suits or proceedings pending or threatened (a) with respect to this
Agreement or any other Document or the Transaction (b) which the Agent or the
Required Banks shall determine could reasonably be expected to (i) have a
Material Adverse Effect or (ii) have a material adverse effect on the
Transaction, the rights or remedies of the Banks or the Agent hereunder or under
any other Credit Document or on the ability of any Credit Party to perform its
respective obligations to the Banks or the Agent hereunder or under any other
Credit Document.
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<PAGE>
5.08 Approvals. On or prior to the Initial Borrowing Date, all
---------
necessary governmental (domestic and foreign) and third party approvals in
connection with the Transaction, the transactions contemplated by the Documents
and otherwise referred to herein or therein shall have been obtained and remain
in effect (other than any such approvals with respect to the Acquisition which
the Borrower reasonably believes are not material to the operations of the
Borrower and its Subsidiaries taken as a whole), and all applicable waiting
periods shall have expired without any action being taken by any competent
authority which restrains, prevents or imposes materially adverse conditions
upon the consummation of the Transaction, the transactions contemplated by the
Documents and otherwise referred to herein or therein. Additionally, there shall
not exist any judgment, order, injunction or other restraint issued or filed or
a hearing seeking injunctive relief or other restraint pending or notified
prohibiting or imposing materially adverse conditions upon the consummation of
the Transaction or the making of Loans.
5.09 Consummation of the Transaction. (a) On the Initial Borrowing
-------------------------------
Date, those elements of the Acquisition contemplated to be consummated on such
date pursuant to the Acquisition Documents shall have been consummated
substantially in accordance with such Acquisition Documents and all applicable
laws, and each of the conditions precedent to the consummation of the
Acquisition set forth in the Acquisition Documents shall have been satisfied and
not waived except with the consent of the Agent and the Required Banks to the
reasonable satisfaction of the Agent and the Required Banks.
(b) (i) On the Initial Borrowing Date, the total commitments in
respect of the Indebtedness to be Refinanced shall have been terminated, and all
loans with respect thereto shall have been repaid in full, together with
interest thereon, all letters of credit issued thereunder shall have been
terminated and all other amounts due and owing pursuant to the Indebtedness to
be Refinanced shall have been repaid in full and all documents in respect of the
Indebtedness to be Refinanced and all guarantees with respect thereto shall have
been terminated (except as to indemnification provisions, which may survive) and
be of no further force and effect.
(ii) On the Initial Borrowing Date, the creditors in respect of the
Indebtedness to be Refinanced shall have terminated and released all security
interests and Liens on the assets owned by Holdings and its Subsidiaries (other
than those security interests and Liens on assets owned by Holdings and its
Subsidiaries located in Puerto Rico which have been assigned to the Collateral
Agent in form and substance satisfactory to the Collateral Agent). The Agent
shall have received such releases of security interests in and Liens on the
assets owned by Holdings and its Subsidiaries as may have been requested by the
Agent, which releases shall be in form and substance reasonably satisfactory to
the Agent. Without limiting the foregoing, there shall have been delivered (i)
proper termination statements (Form UCC-3 or the appropriate equivalent) for
filing under the UCC of each jurisdiction where a financing statement (Form UCC-
1 or the appropriate equivalent) was filed with respect to Holdings or any of
its Subsidiaries in connection with the security interests created with respect
to the Indebtedness to be Refinanced and the documentation related thereto, (ii)
termination or reassignment of any security interest
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<PAGE>
in, or Lien on, any patents, trademarks, copyrights, or similar interests of
Holdings or any of its Subsidiaries on which filings have been made, (iii)
terminations of all mortgages, leasehold mortgages, deeds of trust and leasehold
deeds of trust created with respect to property of Holdings or any of its
Subsidiaries, in each case, to secure the obligations in respect of the
Indebtedness to be Refinanced, all of which shall be in form and substance
reasonably satisfactory to the Agent, and (iv) all collateral owned by Holdings
or any of its Subsidiaries in the possession of any of the creditors in respect
of the Indebtedness to be Refinanced or any collateral agent or trustee under
any related security document shall have been returned to Holdings or such
Subsidiary.
(c) On or prior to the Initial Borrowing Date, there shall have been
delivered to the Banks true and correct copies of all Documents entered into in
connection with the Transaction (including, without limitation, all of the
Acquisition Documents and the Refinancing Documents), and all of the terms and
conditions of such Documents, as well as the structure of the Transaction and
the ownership interests in Holdings after giving effect to the Transaction,
shall be in form and substance reasonably satisfactory to the Agent and the
Required Banks.
(d) On or prior to the Initial Borrowing Date, Holdings shall have
issued to the Seller the Seller Subordinated Note and there shall have been
delivered to the Banks a true and correct copy of the Seller Subordinated Note,
and all terms of the Seller Subordinated Note shall be satisfactory in form and
substance to the Agent and the Required Banks, including, without limitation,
maturity, interest rate, amortization, covenants, defaults, remedies and
subordination to any Guaranteed Obligation.
(e) On the Initial Borrowing Date, the Agent shall have received
evidence in form, scope and substance reasonably satisfactory to it that the
matters set forth in this Section 5.09 have been satisfied on such date.
5.10 Security Documents. (a) On the Initial Borrowing Date,
------------------
Holdings, the Borrower and each Subsidiary Guarantor shall have duly authorized,
executed and delivered a Pledge Agreement in the form of Exhibit F, together
with such changes (or with such other documents) as may be requested by the
Collateral Agent in connection with local law (as modified, amended or
supplemented from time to time in accordance with the terms thereof and hereof,
the "Pledge Agreement") and shall have delivered to the Collateral Agent, as
pledgee thereunder, all of the Pledged Securities referred to therein, endorsed
in blank in the case of promissory notes or accompanied by executed and undated
stock powers in the case of capital stock, and the Pledge Agreement under such
other documents shall be in full force and effect.
(b) On the Initial Borrowing Date, Holdings, the Borrower and each
Subsidiary Guarantor shall have duly authorized, executed and delivered a
Security Agreement in the form of Exhibit G, together with such changes (or with
such other documents) as may be requested by the Collateral Agent in connection
with local law (as modified, amended or supplemented
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<PAGE>
from time to time in accordance with the terms thereof and hereof, the "Security
Agreement") covering all of the Security Agreement Collateral, together with:
(A) executed copies of Financing Statements (Form UCC-1 and/or UCC-3)
or appropriate local equivalent in appropriate form for filing under the
UCC or appropriate local equivalent of each jurisdiction as may be
necessary to perfect the security interests purported to be created by the
Security Agreement;
(B) certified copies of Requests for Information or Copies (Form UCC-
11), or equivalent reports, each of a recent date listing all effective
financing statements that name the Acquired Business, Holdings, the
Borrower or any of their respective Domestic Subsidiaries or a division or
operating unit of any such Person, as debtor and that are filed in the
jurisdictions referred to in clause (A) above, together with copies of such
financing statements (none of which shall cover the Collateral except (x)
those with respect to which appropriate termination statements executed by
the secured lender thereunder have been delivered to the Agent and (y) to
the extent evidencing Permitted Liens);
(C) evidence of the completion of all other recordings and filings
of, or with respect to, the Security Agreement as may be necessary or, in
the opinion of the Collateral Agent, desirable to perfect the security
interests intended to be created by the Security Agreement; and
(D) evidence that all other actions necessary or, in the reasonable
opinion of the Collateral Agent, desirable to perfect the security
interests purported to be created by the Security Agreement have been
taken;
and the Security Agreement and such other documents shall be in full force and
effect.
5.11 Subsidiary Guaranty. On the Initial Borrowing Date, each
-------------------
Subsidiary Guarantor shall have duly authorized, executed and delivered a
Subsidiary Guaranty in the form of Exhibit H (as modified, amended or
supplemented from time to time in accordance with the terms hereof and thereof,
the "Subsidiary Guaranty"), and the Subsidiary Guaranty shall be in full force
and effect.
5.12 Mortgages; Title Insurance; Surveys, etc. (a) On the Initial
-----------------------------------------
Borrowing Date, the Collateral Agent shall have received fully executed
counterparts of deeds of trust, mortgages and similar documents in each case in
form and substance satisfactory to the Collateral Agent (as amended, modified or
supplemented from time to time in accordance with the terms hereof and thereof,
each a "Mortgage" and, collectively, the "Mortgages") covering all the Mortgaged
Properties located in the United States, and arrangements reasonably
satisfactory to the Collateral Agent shall be in place to provide that
counterparts of such Mortgages shall be recorded within two Business Days after
the Initial Borrowing Date in all places to the extent necessary or desirable,
in the judgment of the Collateral Agent, effectively to
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<PAGE>
create a valid and enforceable first priority Lien, subject only to Permitted
Encumbrances, on each such Mortgaged Property in favor of the Collateral Agent
(or such other trustee as may be required or desired under local law) for the
benefit of the Secured Creditors.
(b) On the Initial Borrowing Date, (i) the Collateral Agent shall
have received certified copies of fully executed counterparts of one or more
chattel mortgages covering the personal property of the Borrower and its
Subsidiaries located in Puerto Rico, and arrangements reasonably satisfactory to
the Collateral Agent shall be in place to provide that certified copies of
counterparts of such chattel mortgages shall be presented for recording on the
Initial Borrowing Date or within ten days thereof in all places to the extent
necessary or desirable, in the judgment of the Collateral Agent, effectively to
create a valid and enforceable first priority Lien, subject only to Permitted
Encumbrances, on each such personal property and (ii) the Borrower and/or its
relevant Subsidiary, as the case may be, shall have executed a pledge agreement
(the "Puerto Rico Pledge Agreement") and each of the Borrower and such
Subsidiary shall have delivered to the Collateral Agent the Mortgage Notes (as
defined in the Puerto Rico Pledge Agreement) in respect of such chattel
mortgages.
(c) On the Initial Borrowing Date, the Collateral Agent shall have
received mortgagee title insurance policies (or binding commitments to issue
such title insurance policies) issued by title insurers reasonably satisfactory
to the Collateral Agent (the "Mortgage Policies") in amounts reasonably
satisfactory to the Collateral Agent and assuring the Collateral Agent that the
Mortgages are valid and enforceable first priority mortgage Liens on the
respective Mortgaged Properties, free and clear of all defects and encumbrances
except Permitted Encumbrances. Such Mortgage Policies shall be in form and
substance reasonably satisfactory to the Collateral Agent and (i) shall include
an endorsement for future advances under this Agreement, the Notes and the
Mortgages and for any other matter that the Collateral Agent in its discretion
may reasonably request (to the extent available in the respective jurisdiction
of each Mortgaged Property), (ii) shall not include an exception for mechanics'
liens and (iii) shall provide for affirmative insurance and such reinsurance
(including direct access agreements) as the Collateral Agent in its discretion
may reasonably request.
(d) On the Initial Borrowing Date, the Collateral Agent shall have
also received surveys in form and substance reasonably satisfactory to the
Collateral Agent of each Mortgaged Property designated as "owned" on Annex III
hereto, dated a recent date acceptable to the Collateral Agent, certified in a
manner reasonably satisfactory to the Collateral Agent by a licensed
professional surveyor reasonably satisfactory to the Collateral Agent. The
Collateral Agent shall also have received such estoppel letters, landlord waiver
letters, non-disturbance letters and similar assurances as may have been
requested by the Collateral Agent, which letters shall be in form and substance
reasonably satisfactory to the Collateral Agent.
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<PAGE>
5.13 Plans; Collective Bargaining Agreements; Existing Indebtedness
--------------------------------------------------------------
Agreements; Shareholders' Agreements; Management Agreements; Employment
- -----------------------------------------------------------------------
Agreements; Tax Allocation Agreements; Material Contracts. On or prior to the
- ---------------------------------------------------------
Initial Borrowing Date, there shall have been delivered to the Banks copies,
certified as true and correct by an appropriate officer of the Borrower, of:
(a) any Plans that are to be assumed by Holdings or any of its
Subsidiaries after giving effect to the consummation of the Transaction and
for each such Plan (i) that is a "single-employer plan" (as defined in
Section 4001(a)(15) of ERISA) the most recently completed actuarial
valuation prepared therefor by such Plan's regular enrolled actuary and the
Schedule B, "Actuarial Information" to the IRS Form 5500 (Annual Report)
most recently filed with the Internal Revenue Service and (ii) that is a
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA), each of
the documents referred to in clause (i) either in the possession of
Holdings, any Subsidiary of Holdings or any ERISA Affiliate or reasonably
available thereto from the sponsor or trustees of such Plan;
(b) any collective bargaining agreements or any other similar
agreement or arrangement covering the employees of Holdings or any of its
Subsidiaries that are to remain in effect after giving effect to the
consummation of the Transaction (collectively, the "Collective Bargaining
Agreements");
(c) all agreements evidencing or relating to the Existing
Indebtedness that are to remain in effect after giving effect to the
consummation of the Transaction (collectively, the "Existing Indebtedness
Agreements");
(d) all agreements entered into by Holdings or any of its
Subsidiaries governing the terms and relative rights of its capital stock,
and any agreements entered into by shareholders relating to any such entity
with respect to their capital stock, in each case that are to remain in
effect after giving effect to the consummation of the Transaction
(collectively, the "Shareholders' Agreements");
(e) any material agreements (or the forms thereof) with members of,
or with respect to, the management of Holdings or any of its Subsidiaries
that are to remain in effect after giving effect to the consummation of the
Transaction (collectively, the "Management Agreements");
(f) any employment agreements entered into by Holdings or any of its
Subsidiaries (collectively, the "Employment Agreements");
(g) any tax sharing or tax allocation agreements entered into by
Holdings or any of its Subsidiaries (collectively, the "Tax Allocation
Agreements"); and
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<PAGE>
(h) all material contracts and licenses of Holdings or any of its
Subsidiaries that are to remain in effect after giving effect to the
consummation of the Transaction (collectively, the "Material Contracts");
all of which Plans, Collective Bargaining Agreements, Existing Indebtedness
Agreements, Shareholders' Agreements, Management Agreements, Employment
Agreements, Tax Allocation Agreements and Material Contracts shall be in form
and substance reasonably satisfactory to the Agent and shall be in full force
and effect on the Initial Borrowing Date.
5.14 Solvency Certificate; Environmental Analyses; Insurance
-------------------------------------------------------
Analyses; Financial Statements. On the Initial Borrowing Date, the Agent shall
- ------------------------------
have received:
(a) a Certificate from the Chief Financial Officer of Holdings, in
the form of Exhibit K, addressed to the Agent and each of the Banks and
dated the Initial Borrowing Date and supporting the conclusions, that,
after giving effect to the Transaction and the incurrence of all financings
contemplated herein, the Borrower (on a stand-alone basis), Holdings and
its Subsidiaries (on a consolidated basis) and the Borrower and its
Subsidiaries (on a consolidated basis) are not insolvent and will not be
rendered insolvent by the indebtedness incurred in connection herewith,
will not be left with unreasonably small capital with which to engage in
their respective businesses and will not have incurred debts beyond their
ability to pay such debts as they mature and become due;
(b) environmental assessments from Environ International Corporation
and Environmental Assessment Group, Limited, the results of which shall be
in form and substance satisfactory to the Agent and the Required Banks;
(c) analyses and evidence of insurance complying with the
requirements of Section 7.03 for the business and properties of Holdings
and its Subsidiaries (including, without limitation, the Acquired
Business), in scope, form and substance satisfactory to the Agent and the
Required Banks and naming the Collateral Agent as an additional insured
and/or loss payee, and stating that such insurance shall not be cancelled
or revised without 30 days prior written notice by the insurer to the
Collateral Agent; and
(d) the audited income statement (and related supplemental cash flow
information including depreciation and capital expenditures) for the
Acquired Business for the most recently completed fiscal year, and all of
the foregoing shall be in form and substance reasonably satisfactory to the
Agent and the Required Banks.
5.15 Pro Forma Balance Sheets. On or prior the Initial Borrowing
------------------------
Date, there shall have been delivered to the Agent, an unaudited pro forma
--- -----
consolidated balance sheet of each of Holdings and its Subsidiaries and the
Borrower and its Subsidiaries after giving effect to the Transaction and
prepared in accordance with GAAP, together with a related funds flow
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<PAGE>
statement, which pro forma balance sheets and funds flow statement shall be
--- -----
reasonably satisfactory in form and substance to the Agent and the Required
Banks.
5.16 Projections. On or prior to the Initial Borrowing Date, the
-----------
Banks shall have received the financial projections (the "Projections") set
forth on Annex IV hereto, which include the projected results of Holdings and
its Subsidiaries for the eight fiscal years ended after the Initial Borrowing
Date.
5.17 Existing Indebtedness. On the Initial Borrowing Date and after
---------------------
giving effect to the Transaction and the Loans incurred on the Initial Borrowing
Date, neither Holdings nor any of its Subsidiaries shall have any preferred
stock or Indebtedness outstanding except for Indebtedness permitted under
Section 8.04. On and as of the Initial Borrowing Date, all of the Existing
Indebtedness shall remain outstanding after giving effect to the Transaction and
the other transactions contemplated hereby without any default or events of
default existing thereunder or arising as a result of the Transaction and the
other transactions contemplated hereby (except to the extent amended or waived
by the parties thereto on terms and conditions reasonably satisfactory to the
Agent and the Required Banks). On and as of the Initial Borrowing Date, the
Agent and the Required Banks shall be satisfied with the amount of and the terms
and conditions of all Existing Indebtedness.
5.18 Payment of Fees. On the Initial Borrowing Date, all costs, fees
---------------
and expenses, and all other compensation contemplated by this Agreement, due to
the Agent or the Banks (including, without limitation, legal fees and expenses)
shall have been paid to the extent due.
5.19 Notice of Borrowing; Letter of Credit Request. The Agent shall
---------------------------------------------
have received a Notice of Borrowing satisfying the requirements of Section 1.03
with respect to each incurrence of Loans, and the Agent and the respective
Letter of Credit Issuer shall have received a Letter of Credit Request
satisfying the requirements of Section 2.02 with respect to each issuance of a
Letter of Credit.
The acceptance of the benefits of each Credit Event shall constitute a
representation and warranty by each Credit Party to each of the Banks that all
of the applicable conditions specified above exist as of the date of such Credit
Event. All of the certificates, legal opinions and other documents and papers
referred to in this Section 5, unless otherwise specified, shall be delivered to
the Agent at its Notice Office for the account of each of the Banks and, except
for the Notes, in sufficient counterparts for each of the Banks and shall be
satisfactory in form and substance to the Agent and the Required Banks.
SECTION 6. Representations, Warranties and Agreements. In order to
------------------------------------------
induce the Banks to enter into this Agreement and to make the Loans and issue
and/or participate in the Letters of Credit provided for herein, each of
Holdings and the Borrower makes the following representations, warranties and
agreements with the Banks in each case after giving effect to the Transaction,
all of which shall survive the execution and delivery of this
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Agreement, the making of the Loans and the issuance of the Letters of Credit
(with the occurrence of each Credit Event being deemed to constitute a
representation and warranty that the matters specified in this Section 6 are
true and correct in all material respects on and as of the date of each such
Credit Event, unless stated to relate to a specific earlier date in which all
representations and warranties shall be true and correct in all material
respects as of such earlier date):
6.01 Corporate Status. Holdings and each of its Subsidiaries (i) is
----------------
a duly organized and validly existing corporation in good standing (to the
extent such concept is relevant in such jurisdiction) under the laws of the
jurisdiction of its organization, (ii) has the corporate power and authority to
own its property and assets and to transact the business in which it is engaged
and presently proposes to engage and (iii) is duly qualified and is authorized
to do business and is in good standing in all jurisdictions where it is required
to be so qualified and where the failure to be so qualified would have a
Material Adverse Effect.
6.02 Corporate Power and Authority. Each Credit Party has the
-----------------------------
corporate power and authority to execute, deliver and carry out the terms and
provisions of the Documents to which it is a party and has taken all necessary
corporate action to authorize the execution, delivery and performance of the
Documents to which it is a party. Each Credit Party has duly executed and
delivered each Document to which it is a party and each such Document
constitutes the legal, valid and binding obligation of such Credit Party
enforceable in accordance with its terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws generally affecting creditors' rights
and by equitable principles (regardless of whether enforcement is sought in
equity or at law).
6.03 No Violation. Neither the execution, delivery or performance by
------------
any Credit Party of the Documents to which it is a party nor compliance by any
Credit Party with the terms and provisions thereof, nor the consummation of the
transactions contemplated herein or therein, (i) will contravene any applicable
provision of any law, statute, rule or regulation, or any order, writ,
injunction or decree of any court or governmental instrumentality, (ii) except
as set forth on Annex XVII, will conflict or be inconsistent with or result in
any breach of, any of the terms, covenants, conditions or provisions of, or
constitute a default under, or (other than pursuant to the Security Documents)
result in the creation or imposition of (or the obligation to create or impose)
any Lien upon any of the property or assets of Holdings or any of its
Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust,
loan agreement, credit agreement or any other material agreement or instrument
to which Holdings or any of its Subsidiaries is a party or by which it or any of
its property or assets are bound or to which it may be subject or (iii) will
violate any provision of the Certificate of Incorporation or By-Laws of Holdings
or any of its Subsidiaries.
6.04 Litigation. There are no actions, suits or proceedings pending
----------
or, to the knowledge of Holdings or any of its Subsidiaries, threatened, with
respect to Holdings or any of its Subsidiaries (i) that could reasonably be
expected to have a Material Adverse Effect or
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(ii) that could reasonably be expected to have a material adverse effect on the
rights or remedies of the Banks or on the ability of any Credit Party to perform
its respective obligations to the Banks hereunder and under the other Credit
Documents to which it is, or will be, a party. Additionally, there does not
exist any judgment, order or injunction prohibiting or imposing material adverse
conditions upon the occurrence of any Credit Event.
6.05 Use of Proceeds; Margin Regulations. (a) The proceeds of all
-----------------------------------
Term Loans shall be utilized to finance the Transaction and to pay fees and
expenses incurred in connection therewith.
(b) The proceeds of Revolving Loans and Swingline Loans shall be
utilized for the general corporate and working capital purposes of the Borrower
and its Subsidiaries; provided that proceeds of Revolving Loans and Swingline
--------
Loans in an aggregate amount not to exceed $20,000,000 may be used to finance
the Transaction.
(c) Neither the making of any Loan hereunder, nor the use of the
proceeds thereof, will violate the provisions of Regulation G, T, U or X of the
Board of Governors of the Federal Reserve System and no part of the proceeds of
any Loan will be used to purchase or carry any Margin Stock or to extend credit
for the purpose of purchasing or carrying any Margin Stock.
6.06 Governmental Approvals. No order, consent, approval, license,
----------------------
authorization, or validation of, or filing, recording or registration with, or
exemption by, any foreign or domestic governmental or public body or authority,
or any subdivision thereof (other than any such approvals with respect to the
Acquisition which the Borrower reasonably believes are not material to the
operations of the Borrower and its Subsidiaries taken as a whole), is required
to authorize or is required in connection with (i) the execution, delivery and
performance of any Document or (ii) the legality, validity, binding effect or
enforceability of any Document.
6.07 Investment Company Act. Neither Holdings nor any of its
----------------------
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
6.08 Public Utility Holding Company Act. Neither Holdings nor any of
----------------------------------
its Subsidiaries is a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
6.09 True and Complete Disclosure. All factual information (taken as
----------------------------
a whole) heretofore or contemporaneously furnished by or on behalf of Holdings
or any of its Subsidiaries in writing to the Agent or any Bank (including,
without limitation, all information contained in the Documents) for purposes of
or in connection with this Agreement or any transaction contemplated herein is,
and all other such factual information (taken as a whole) hereafter furnished by
or on behalf of any such Persons in writing to the Agent or any Bank
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will be, true and accurate in all material respects on the date as of which such
information is dated or certified and not incomplete by omitting to state any
material fact necessary to make such information (taken as a whole) not
misleading at such time in light of the circumstances under which such
information was provided.
6.10 Financial Condition; Financial Statements. (a) On and as of
-----------------------------------------
the Initial Borrowing Date, on a pro forma basis after giving effect to the
--- -----
Transaction and to all Indebtedness incurred, and to be incurred (including,
without limitation, the Loans), and Liens created, and to be created, by each
Credit Party in connection therewith, with respect to each of Holdings and its
Subsidiaries (on a consolidated basis) the Borrower and its Subsidiaries (on a
consolidated basis) and of the Borrower (on a stand-alone basis) (x) the sum of
the assets, at a fair valuation, of each of Holdings and its Subsidiaries (on a
consolidated basis), the Borrower and its Subsidiaries (on a consolidated basis)
and of the Borrower (on a stand-alone basis) will exceed its debts, (y) it has
not incurred nor intended to, nor believes that it will, incur debts beyond its
ability to pay such debts as such debts mature and (z) it will have sufficient
capital with which to conduct its business. For purposes of this Section 6.10,
"debt" means any liability on a claim, and "claim" means (i) right to payment
whether or not such a right is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured or unsecured or (ii) right to an equitable remedy for breach of
performance if such breach gives rise to a payment, whether or not such right to
an equitable remedy is reduced to judgment, fixed, contingent, matured,
unmatured, disputed, undisputed, secured or unsecured.
(b) The statements of financial condition of the Borrower and its
Subsidiaries at December 31, 1995 and the related statements of income and cash
flows and changes in shareholders' equity of Borrower and its Subsidiaries for
the approximately six-month period ended as of said date, copies of which have
heretofore been furnished to each Bank, present fairly in all material respects
the consolidated financial position of Borrower and its Subsidiaries at the date
of said statements and the results for the periods covered thereby. All such
financial statements have been prepared in accordance with GAAP consistently
applied except to the extent provided in the notes to said financial statements.
(c) Except as set forth on Annex XVI, the statements of financial
condition of the Acquired Business at March 31, 1996 and the related statements
of income and cash flows of the Acquired Business for the fiscal years ended as
of said dates, copies of which have heretofore been furnished to each Bank,
present fairly in all material respects the consolidated financial position of
the Acquired Business at the dates of said statements and the results for the
periods covered thereby. All such financial statements have been prepared in
accordance with GAAP consistently applied except to the extent provided in the
notes to said financial statements.
(d) Since March 31, 1996, nothing has occurred that has had or could
reasonably be expected to have a Material Adverse Effect.
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<PAGE>
(e) Except as fully reflected in the financial statements described
in Section 6.10(b) and (c) and the Indebtedness incurred under this Agreement,
(i) there were as of the Initial Borrowing Date (and after giving effect to any
Loans made on such date), no liabilities or obligations (excluding current
obligations incurred in the ordinary course of business) with respect to
Holdings or any of its Subsidiaries of any nature whatsoever (whether absolute,
accrued, contingent or otherwise and whether or not due), and (ii) neither
Holdings nor the Borrower know of any basis for the assertion against Holdings
or any of its Subsidiaries of any such liability or obligation which, in the
case of clause (i) or (ii) either individually or in the aggregate, is or would
be reasonably likely to have, a Material Adverse Effect.
(f) The Projections are based on good faith estimates and assumptions
made by the management of Holdings, and on the Initial Borrowing Date such
management believed that the Projections were reasonable and attainable, it
being recognized by the Banks, however, that projections as to future events are
not to be viewed as facts and that the actual results during the period or
periods covered by the Projections probably will differ from the projected
results and that the differences may be material. There is no fact known to
Holdings or any of its Subsidiaries which would have a Material Adverse Effect,
which has not been disclosed herein or in such other documents, certificates and
statements furnished to the Banks for use in connection with the transactions
contemplated hereby.
6.11 Security Interests. On and after the Initial Borrowing Date,
------------------
each of the Security Documents creates (or after the execution and delivery
thereof will create), as security for the Obligations, a valid and enforceable
perfected security interest in and Lien on all of the Collateral subject
thereto, superior to and prior to the rights of all third Persons and subject to
no other Liens (except that the Security Agreement Collateral, the Mortgaged
Properties and the collateral covered by the Additional Security Documents may
be subject to Permitted Liens relating thereto), in favor of the Collateral
Agent. No filings or recordings are required in order to perfect the security
interests created under any Security Document except for filings or recordings
required in connection with any such Security Document which shall have been
made on or prior to the Initial Borrowing Date as contemplated by Section
5.10(b) or on or prior to the execution and delivery thereof as contemplated by
Sections 7.11, 7.15 and 8.14.
6.12 Representations and Warranties in Other Documents. All
-------------------------------------------------
representations and warranties set forth in the other Documents were true and
correct in all respects as of the time such representations and warranties were
made and shall be true and correct in all respects as of the Initial Borrowing
Date as if such representations and warranties were made on and as of such date,
unless stated to relate to a specific earlier date, in which case such
representations and warranties shall be true and correct in all respects as of
such earlier date, in each case except to the extent that the failure of any
such representation and warranty to be true and correct in all respects, either
individually or in the aggregate with other such representations and warranties,
is not reasonably likely to have a Material Adverse Effect.
6.13 Transaction. At the time of consummation thereof, the
-----------
Transaction shall have been consummated in all material respects in accordance
with the terms of the Documents
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and all applicable laws. At the time of consummation thereof, all consents and
approvals of, and filings and registrations with, and all other actions in
respect of, all governmental agencies, authorities or instrumentalities required
in order to make or consummate the Transaction have been obtained, given, filed
or taken or waived and are or will be in full force and effect (or effective
judicial relief with respect thereto has been obtained) except where the failure
to obtain, give, file, or take would not reasonably be expected to have a
Material Adverse Effect. All applicable waiting periods with respect thereto
have or, prior to the time when required, will have, expired without, in all
such cases, any action being taken by any competent authority which restrains,
prevents, or imposes material adverse conditions upon the Transaction.
Additionally, there does not exist any judgment, order or injunction prohibiting
or imposing material adverse conditions upon the Transaction, or the performance
by Holdings and its Subsidiaries of their obligations under the Documents and
all applicable laws.
6.14 Special Purpose Corporation. Holdings has no significant assets
---------------------------
(other than the capital stock of the Borrower, immaterial assets used for the
performance of those activities permitted to be performed by Holdings pursuant
to Section 8.01(b) and Borrower Subordinated Notes) or liabilities (other than
under this Agreement and the other Credit Documents, those liabilities under the
other Documents, those liabilities permitted to be incurred by Holdings pursuant
to Section 8.01(b)) and, as and when issued from time to time in accordance with
the terms of this Agreement, Permitted Holdings PIK Securities and Shareholder
Subordinated Notes).
6.15 Compliance with ERISA. (a) Each Plan is in substantial
---------------------
compliance with ERISA and the Code; no Reportable Event has occurred with
respect to a Plan; no Plan is insolvent or in reorganization; no Plan has an
Unfunded Current Liability; no Plan has an accumulated or waived funding
deficiency, has permitted decreases in its funding standard account or has
applied for a waiver of the minimum funding standard or an extension of any
amortization period within the meaning of Section 412 of the Code; all
contributions required to be made with respect to a Plan and a Foreign Pension
Plan have been timely made; neither Holdings nor any Subsidiary of Holdings nor
any ERISA Affiliate has incurred any material liability to or on account of a
Plan pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201,
4204 or 4212 of ERISA or Section 401(a)(29), 4971, 4975 or 4980 of the Code or
reasonably expects to incur any material liability (including any indirect,
contingent or secondary liability) under any of the foregoing Sections with
respect to any Plan (other than liabilities of any ERISA Affiliate which could
not, by operation of law or otherwise, become a liability of Holdings or any of
its Subsidiaries); no proceedings have been instituted to terminate, or to
appoint a trustee to administer, any Plan; no condition exists which presents a
material risk to Holdings or any Subsidiary of Holdings or any ERISA Affiliate
of incurring a liability to or on account of a Plan pursuant to the foregoing
provisions of ERISA and the Code; using actuarial assumptions and computation
methods consistent with subpart 1 of subtitle E of Title IV of ERISA, the
aggregate liabilities of Holdings and its Subsidiaries and its ERISA Affiliates
to all Plans which are multiemployer plans (as defined in Section 4001(a)(3) of
ERISA) in the event of a complete withdrawal therefrom, as of the close of the
most recent fiscal year of each such Plan ended prior to the date of the most
recent Credit Event, would not
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result in a Material Adverse Effect; no lien imposed under the Code or ERISA on
the assets of Holdings or any Subsidiary of Holdings or any ERISA Affiliate
exists or is likely to arise on account of any Plan; and Holdings and its
Subsidiaries do not maintain or contribute to any employee welfare benefit plan
(as defined in Section 3(1) of ERISA) which provides benefits to retired
employees or other former employees (other than as required by Section 601 of
ERISA) or any employee pension benefit plan (as defined in Section 3(2) of
ERISA) the obligations with respect to which could reasonably be expected to
have a Material Adverse Effect.
(b) Each Foreign Pension Plan has been maintained in substantial
compliance with its terms and with the requirements of any and all applicable
laws, statutes, rules, regulations and orders and has been maintained, where
required, in good standing with applicable regulatory authorities. Neither
Holdings nor any of its Subsidiaries has incurred any material obligation in
connection with the termination of or withdrawal from any Foreign Pension Plan.
The present value of the accrued benefit liabilities (whether or not vested)
under each Foreign Pension Plan which is funded, determined as of the end of the
most recently ended fiscal year of the Borrower on the basis of actuarial
assumptions, each of which is reasonable, did not exceed the current value of
the assets of such Foreign Pension Plan, and for each Foreign Pension Plan which
is not funded, the obligations of such Foreign Pension Plan are properly
accrued.
6.16 Capitalization. (a) On the Initial Borrowing Date, the
--------------
authorized capital stock of (i) Holdings shall consist of 5,400,000 shares of
common stock, $.01 par value per share (such authorized shares of common stock,
together with any subsequently authorized shares of common stock of Holdings,
the "Holdings Common Stock"), of which [3,870,000] shares shall be issued and
outstanding and (ii) 600,000 shares of Class L common stock, 0.01 par value per
share (such authorized shares of Class L common stock, together with any
subsequently authorized shares of Class L common stock of Holdings, the
"Holdings Class L Common Stock"), of which [430,000] shares will be issued and
outstanding. All such outstanding shares have been duly and validly issued, are
fully paid and nonassessable. Except as set forth on Annex X hereto, Holdings
does not have outstanding any securities convertible into or exchangeable for
its capital stock or outstanding any rights to subscribe for or to purchase, or
any options for the purchase of, or any agreement providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to, its capital stock.
(b) On the Initial Borrowing Date and after giving effect to the
Transaction and the other transactions contemplated hereby, the authorized
capital stock of the Borrower shall consist of 1,000 shares of common stock,
$.01 par value per share, all of which shares shall be issued and outstanding
and owned by Holdings. All such outstanding shares have been duly and validly
issued and are fully paid and nonassessable. The Borrower does not have
outstanding any securities convertible into or exchangeable for its capital
stock or outstanding any rights to subscribe for or to purchase, or any options
for the purchase of, or any agreements
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providing for the issuance (contingent or otherwise) of, or any calls,
commitments or claims of any character relating to, its capital stock.
6.17 Subsidiaries. On and as of the Initial Borrowing Date and after
------------
giving effect to the consummation of the Transaction, Holdings has no
Subsidiaries other than the Borrower and its Subsidiaries, and the Borrower has
no Subsidiaries other than those Subsidiaries listed on Annex V. Annex V
correctly sets forth, as of the Initial Borrowing Date and after giving effect
to the Transaction, the percentage ownership (direct and indirect) of Holdings
in each class of capital stock of each of its Subsidiaries and also identifies
the direct owner thereof. All outstanding shares of capital stock of each
Subsidiary of the Borrower have been duly and validly issued, are fully paid and
nonassessable and have been issued free of preemptive rights. No Subsidiary of
the Borrower has outstanding any securities convertible into or exchangeable for
its capital stock or outstanding any right to subscribe for or to purchase, or
any options or warrants for the purchase of, or any agreement providing for the
issuance (contingent or otherwise) of or any calls, commitments or claims of any
character relating to, its capital stock or any stock appreciation or similar
rights.
6.18 Intellectual Property. Except as set forth on Annex XIII,
---------------------
Holdings and each of its Subsidiaries owns or holds a valid license to use all
the material patents, trademarks, permits, service marks, trade names,
technology, know-how and formulas or other rights with respect to the foregoing,
free from restrictions that are materially adverse to the use thereof, that are
used in the operation of the business of Holdings and each of its Subsidiaries
as presently conducted.
6.19 Compliance with Statutes, etc. Holdings and each of its
------------------------------
Subsidiaries is in compliance with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the ownership
of its property (including compliance with all applicable Environmental Laws
with respect to any Real Property or governing its business and the requirements
of any permits issued under such Environmental Laws with respect to any such
Real Property or the operations of Holdings or any of its Subsidiaries), except
such non-compliance as is not likely to, individually or in the aggregate, have
a Material Adverse Effect.
6.20 Environmental Matters. (a) Holdings and each of its
---------------------
Subsidiaries have complied with, and on the date of each Credit Event are in
compliance with, all applicable Environmental Laws and the requirements of any
permits issued under such Environmental Laws. There are no pending or, to the
best knowledge of Holdings and the Borrower, past or threatened Environmental
Claims against Holdings or any of its Subsidiaries or any Real Property owned or
operated by Holdings or any of its Subsidiaries that individually or in the
aggregate would reasonably be expected to have a Material Adverse Effect. There
are no facts, circumstances, conditions or occurrences on any Real Property
owned or operated by Holdings or any of its Subsidiaries or, to the best
knowledge of Holdings and the Borrower, on any property adjoining or in the
vicinity of any such Real Property that would reasonably be expected (i) to form
the basis of an Environmental Claim against Holdings or any of its
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Subsidiaries or any such Real Property that individually or in the aggregate
would reasonably be expected to have a Material Adverse Effect or (ii) to cause
any such Real Property to be subject to any restrictions on the ownership,
occupancy, use or transferability of such Real Property by Holdings or any of
its Subsidiaries under any applicable Environmental Law.
(b) Hazardous Materials have not at any time been generated, used,
treated or stored on, or transported to or from, any Real Property owned or
operated by Holdings or any of its Subsidiaries where such generation, use,
treatment or storage has violated or would reasonably be expected to violate any
Environmental Law. Hazardous Materials have not at any time been Released on or
from any Real Property owned or operated by Holdings or any of its Subsidiaries.
There are not now any underground storage tanks located on any Real Property
owned or operated by Holdings or any of its Subsidiaries.
(c) Notwithstanding anything to the contrary in this Section 6.20,
the representations made in this Section 6.20 shall only be untrue if the
aggregate effect of all restrictions, failures, noncompliance, Environmental
Claims, Releases and presence of underground storage tanks, in each case of the
types described above, would reasonably be expected to have a Material Adverse
Effect.
6.21 Properties. All Real Property owned or leased by Holdings or
----------
any of its Domestic Subsidiaries as of the Initial Borrowing Date and after
giving effect to the Transaction, and the nature of the interest therein, is
correctly set forth in Annex III. Holdings and each of its Subsidiaries has
good and marketable title to, or a validly subsisting leasehold interest in, all
material properties owned or leased by it, including all Real Property reflected
in Annex III or in the financial statements referred to in Section 6.10(b) or
(c), free and clear of all Liens, other than Permitted Liens.
6.22 Labor Relations. Neither Holdings nor any of its Subsidiaries
---------------
is engaged in any unfair labor practice that could reasonably be expected to
have a Material Adverse Effect. There is (i) no unfair labor practice complaint
pending against Holdings or any of its Subsidiaries or, to the best knowledge of
Holdings and the Borrower, threatened against any of them, before the National
Labor Relations Board, and no grievance or arbitration proceeding arising out of
or under any collective bargaining agreement is so pending against Holdings or
any of its Subsidiaries or, to the best knowledge of Holdings and the Borrower,
threatened against any of them, (ii) no strike, labor dispute, slowdown or
stoppage pending against Holdings or any of its Subsidiaries or, to the best
knowledge of Holdings and the Borrower, threatened against Holdings or any of
its Subsidiaries and (iii) to the best knowledge of Holdings and the Borrower,
no union representation question existing with respect to the employees of
Holdings or any of its Subsidiaries and, to the best knowledge of Holdings and
the Borrower, no union organizing activities are taking place, except (with
respect to any matter specified in clause (i), (ii) or (iii) above, either
individually or in the aggregate) such as is not reasonably likely to have a
Material Adverse Effect.
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6.23 Tax Returns and Payments. All Federal, material state and other
------------------------
material returns, statements, forms and reports for taxes (the "Returns")
required to be filed by or with respect to the income, properties or operations
of the Acquired Business and of Holdings and/or any of its Subsidiaries have
been timely filed with the appropriate taxing authority. The Returns accurately
reflect all liability for taxes of the Acquired Business and of Holdings and its
Subsidiaries, as the case may be, for the periods covered thereby. The Acquired
Business and Holdings and each of its Subsidiaries have paid all taxes payable
by them other than taxes which are not yet due and payable, and other than those
contested in good faith by appropriate proceedings and for which adequate
reserves have been established in accordance with GAAP. Except as disclosed in
the financial statements referred to in Section 6.10(b) and (c), there is no
material action, suit, proceeding, investigation, audit, or claim now pending
or, to the knowledge of Holdings and the Borrower, threatened by any authority
regarding any taxes relating to the Acquired Business or to Holdings or any of
its Subsidiaries. As of the Initial Borrowing Date, neither the Acquired
Business nor Holdings or any of its Subsidiaries has entered into an agreement
or waiver or been requested to enter into an agreement or waiver extending any
statute of limitations relating to the payment or collection of taxes of the
Acquired Business, Holdings or any of its Subsidiaries, or is aware of any
circumstances that would cause the taxable years or other taxable periods of the
Acquired Business or Holdings or any of its Subsidiaries not to be subject to
the normally applicable statute of limitations. Neither the Acquired Business
nor Holdings or any of its Subsidiaries have provided, with respect to
themselves or property held by them, any consent under Section 341 of the Code.
Neither the Acquired Business nor Holdings or any of its Subsidiaries has
incurred, or will incur, any material tax liability in connection with the
Transaction and the other transactions contemplated hereby.
6.24 Existing Indebtedness. Annex VII sets forth a true and complete
---------------------
list of all Indebtedness of Holdings and its Subsidiaries as of the Initial
Borrowing Date and which is to remain outstanding after giving effect to the
Transaction and the incurrence of Loans on such date (excluding the Loans and
the Letters of Credit, the "Existing Indebtedness"), in each case showing the
aggregate principal amount thereof and the name of the respective borrower and
any other entity which directly or indirectly guaranteed such debt.
6.25 Subordination. On and after the issuance of the Seller
-------------
Subordinated Note, the subordination provisions contained in the Seller
Subordinated Note shall be enforceable against Holdings and the holder thereof,
and all Obligations shall be within the definition of "Superior Debt" included
in such subordination provisions.
SECTION 7. Affirmative Covenants. Holdings and the Borrower hereby
---------------------
covenant and agree that on the Effective Date and thereafter for so long as this
Agreement is in effect and until the Commitments have terminated, no Letters of
Credit or Notes are outstanding and the Loans and Unpaid Drawings, together with
interest, Fees and all other Obligations (other than any indemnities described
in Section 12.13 hereof which are not then due and payable) incurred hereunder,
are paid in full:
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7.01 Information Covenants. Holdings will furnish to each Bank:
---------------------
(a) Monthly Reports. Within 30 days after the end of each fiscal
---------------
month of Holdings (or 45 days in the case of each fiscal month ending on or
prior to December 31, 1996), the consolidated balance sheet of the Borrower and
its Subsidiaries as at the end of such fiscal month and the related consolidated
statements of income and retained earnings and of cash flows for such fiscal
month and for the elapsed portion of the fiscal year ended with the last day of
such fiscal month, setting forth comparable budgeted figures for such fiscal
month and, commencing with the first fiscal month to end after the first
anniversary of the Initial Borrowing Date, setting forth comparative figures for
the corresponding month in the prior fiscal year, all of which shall be
certified by the chief financial officer or other Authorized Officer of the
Borrower, subject to normal year-end audit adjustments and the absence of
footnote disclosure.
(b) Quarterly Financial Statements. Within 45 days after the close
------------------------------
of each quarterly accounting period in each fiscal year of Holdings (or 60 days
in the case of quarterly accounting periods ending on or prior to December 31,
1996), the consolidated balance sheet of Holdings and its Subsidiaries as at the
end of such quarterly accounting period and the related consolidated statements
of income and retained earnings and of cash flows for such quarterly accounting
period and for the elapsed portion of the fiscal year ended with the last day of
such quarterly accounting period, all of which shall be in reasonable detail and
certified by the chief financial officer or other Authorized Officer of Holdings
that they fairly present the financial condition of Holdings and its
Subsidiaries as of the dates indicated and the results of their operations and
changes in their cash flows for the periods indicated, subject to normal year-
end audit adjustments and the absence of footnote disclosure.
(c) Annual Financial Statements. Within 90 days after the close of
---------------------------
each fiscal year of Holdings (or 120 days in the case of the fiscal year ended
December 31, 1996), the consolidated balance sheet of Holdings and its
Subsidiaries as at the end of such fiscal year and the related consolidated
statements of income and retained earnings and of cash flows for such fiscal
year, setting forth comparative budgeted figures for such fiscal year and,
commencing with the fiscal year ending December 31, 1998, setting forth
comparative consolidated figures for the preceding fiscal year, and, in the case
of all such financial statements (but excluding such comparative budgeted
figures), certified by Price Waterhouse LLP or such other independent certified
public accountants of recognized national standing as shall be reasonably
acceptable to the Agent, in each case to the effect that such statements fairly
present in all material respects the financial condition of Holdings and its
Subsidiaries as of the dates indicated and the results of their operations and
cash flows, together with a certificate of such accounting firm stating that in
the course of its regular audit of the business of Holdings and its
Subsidiaries, which audit was conducted in accordance with generally accepted
auditing standards, no Default or Event of Default which has occurred and is
continuing has come to their attention insofar as such Default or Event of
Default relates to financial and accounting matters or, if such a Default or
Event of Default has come to their attention a statement as to the nature
thereof.
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(d) Budgets, etc. Not more than 60 days after the commencement of
-------------
each fiscal year of the Borrower, budgets of the Borrower and its Subsidiaries
in reasonable detail for each of the four fiscal quarters of such fiscal year as
customarily prepared by management for its internal use setting forth, with
appropriate discussion, the principal assumptions upon which such budgets are
based. Together with each delivery of financial statements pursuant to Section
7.01(b) and (c), a comparison of the current year to date financial results
(other than in respect of the balance sheets included therein) against the
budgets required to be submitted pursuant to this clause (d) shall be presented.
(e) Officer's Certificates. At the time of the delivery of the
----------------------
financial statements provided for in Section 7.01(b) and (c), a certificate of
the chief financial officer or other Authorized Officer of Holdings to the
effect that no Default or Event of Default exists or, if any Default or Event of
Default does exist, specifying the nature and extent thereof, which certificate
shall set forth the calculations required to establish whether Holdings and
its Subsidiaries were in compliance with the provisions of Sections 8.04(d),
8.04(h), 8.05 and 8.08 through and including 8.11, as at the end of such fiscal
quarter or year, as the case may be. In addition, at the time of the delivery
of the financial statements provided for in Section 7.01(c), a certificate of
the chief financial officer or other Authorized Officer of Holdings setting
forth the amount of, and calculations required to establish the amount of,
Excess Cash Flow for the Excess Cash Flow Period ending on the last day of the
respective fiscal year. Further, at the time that Holdings either contributes
or loans any cash to the Borrower the proceeds of which are not required to be
used to repay Term Loans as provided in clause (i) of the final proviso to
Section 4.02(A)(d), a certificate of the chief financial officer or other
Authorized Officer of Holdings setting forth the intended use by the Borrower or
its Subsidiaries of such proceeds.
(f) Notice of Default or Litigation. Promptly, and in any event
-------------------------------
within five Business Days (or 10 Business Days in the case of clause (y) below)
after any Senior Officer of Holdings or any of its Subsidiaries obtains
knowledge thereof, notice of (x) the occurrence of any event which constitutes a
Default or an Event of Default, which notice shall specify the nature thereof,
the period of existence thereof and what action Holdings or the Borrower
proposes to take with respect thereto and shall state that such notice is a
"notice of default" and (y) the commencement of, or threat of, or any
significant development in, any litigation or governmental proceeding pending
against Holdings or any of its Subsidiaries which is likely to have a Material
Adverse Effect, or a material adverse effect on the ability of any Credit Party
to perform its respective obligations hereunder or under any other Credit
Document.
(g) Auditors' Reports. Promptly upon receipt thereof, a copy of each
-----------------
report or "management letter" submitted to Holdings or any of its Subsidiaries
by its independent accountants in connection with any annual, interim or special
audit made by them of the books of Holdings or any of its Subsidiaries.
(h) Environmental Matters. Promptly after obtaining knowledge of any
---------------------
of the following, written notice of:
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<PAGE>
(i) any pending or threatened material Environmental Claim against
Holdings or any of its Subsidiaries or any Real Property owned or operated
by Holdings or any of its Subsidiaries;
(ii) any condition or occurrence on any Real Property owned or
operated by Holdings or any of its Subsidiaries that (x) results in
material noncompliance by Holdings or any of its Subsidiaries with any
applicable Environmental Law or (y) could reasonably be anticipated to form
the basis of a material Environmental Claim against Holdings or any of its
Subsidiaries or any such Real Property;
(iii) any condition or occurrence on any Real Property owned or
operated by Holdings or any of its Subsidiaries that could reasonably be
anticipated to cause such Real Property to be subject to any material
restrictions on the ownership, occupancy, use or transferability by
Holdings or its Subsidiary, as the case may be, of its interest in such
Real Property under any Environmental Law; and
(iv) the taking of any material removal or remedial action in
response to the actual or alleged presence of any Hazardous Material on any
Real Property owned or operated by Holdings or any of its Subsidiaries
where Holdings or any of its Subsidiaries is or is reasonably expected to
be responsible for the cost of such action or where the taking of such
action could reasonably be expected to materially interfere with the
operations of Holdings or any of its Subsidiaries at such Real Property.
All such notices shall describe in reasonable detail the nature of the
claim, investigation, condition, occurrence or removal or remedial action and
Holdings' or the Borrower's response thereto. In addition, Holdings agrees to
provide the Banks with copies of all material written communications by Holdings
or any of its Subsidiaries with any Person, government or governmental agency
relating to any of the matters set forth in clauses (i)-(iv) above, and such
detailed reports relating to any of the matters set forth in clauses (i)-(iv)
above, as may reasonably be requested by the Agent or the Required Banks.
(i) Other Information. Promptly upon transmission thereof, copies of
-----------------
any filings and registrations with, and reports to, the SEC by Holdings or any
of its Subsidiaries and copies of all financial statements, proxy statements,
notices and reports as Holdings or any of its Subsidiaries shall generally send
to analysts or the holders of their capital stock or of the Seller Subordinated
Note in their capacity as holders (in each case to the extent not theretofore
delivered to the Banks pursuant to this Agreement) and, with reasonable
promptness, such other information or documents (financial or otherwise) as the
Agent on its own behalf or on behalf of any Bank may reasonably request from
time to time.
7.02 Books, Records and Inspections. Holdings will, and will cause
------------------------------
each of its Subsidiaries to, permit, upon notice to the chief financial officer
or other Authorized Officer of Holdings or the Borrower, (x) officers and
designated representatives of the Agent or any Bank to visit and inspect any of
the properties or assets of Holdings and any of its Subsidiaries
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in whomsoever's possession, and to examine the books of account of Holdings and
any of its Subsidiaries and discuss the affairs, finances and accounts of
Holdings and of any of its Subsidiaries with, and be advised as to the same by,
their officers and independent accountants, all at such reasonable times and
intervals and to such reasonable extent as the Agent or any Bank may desire and
(y) the Agent, at the request of the Required Banks, to conduct, at Holdings'
and the Borrower's expense, an audit of the accounts receivable and/or
inventories of the Borrower and its Subsidiaries at such times (but no more
frequently than once a year unless an Event of Default has occurred and is
continuing) as the Required Banks shall reasonably require.
7.03 Insurance. Holdings will, and will cause each of its
---------
Subsidiaries to, at all times from and after the Effective Date maintain in full
force and effect insurance with reputable and solvent insurance carriers in such
amounts, covering such risks and liabilities and with such deductibles or self-
insured retentions as are in accordance with normal industry practice. At any
time that insurance at the levels described in Annex VI is not being maintained
by Holdings and its Subsidiaries, Holdings will notify the Banks in writing
thereof and, if thereafter notified by the Agent to do so, Holdings will obtain
insurance at such levels to the extent then generally available (but in any
event within the deductible or self-insured retention limitations set forth in
the preceding sentence) or otherwise as are acceptable to the Agent. Holdings
will furnish to the Agent on the Initial Borrowing Date and on each date as the
Agent or the Required Banks may reasonably request, a summary of the insurance
carried in respect of Holdings and its Subsidiaries and the assets of Holdings
and its Subsidiaries together with certificates of insurance and other evidence
of such insurance, if any, naming the Collateral Agent as an additional insured
and/or loss payee.
7.04 Payment of Taxes. Holdings will pay and discharge, and will
----------------
cause each of its Subsidiaries to pay and discharge, all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any properties belonging to it, prior to the date on which material
penalties attach thereto, and all lawful claims for sums that have become due
and payable which, if unpaid, might become a Lien not otherwise permitted under
Section 8.03(a) or charge upon any properties of Holdings or any of its
Subsidiaries; provided, that neither Holdings nor any of its Subsidiaries shall
--------
be required to pay any such tax, assessment, charge, levy or claim which is
being contested in good faith and by proper proceedings if it has maintained
adequate reserves with respect thereto in accordance with GAAP.
7.05 Corporate Franchises. Holdings will do, and will cause each of
--------------------
its Subsidiaries to do, or cause to be done, all things necessary to preserve
and keep in full force and effect its existence and its material rights,
franchises and authority to do business; provided, however, that any transaction
-------- -------
permitted by Section 8.02 will not constitute a breach of this Section 7.05.
7.06 Compliance with Statutes, etc. Holdings will, and will cause
------------------------------
each of its Subsidiaries to, comply with all applicable statutes, regulations
and orders of, and all applicable
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<PAGE>
restrictions imposed by, all governmental bodies, domestic or foreign, in
respect of the conduct of its business and the ownership of its property
(including applicable statutes, regulations, orders and restrictions relating to
environmental standards and controls) other than such non-compliance as would
not have a Material Adverse Effect or a material adverse effect on the ability
of any Credit Party to perform its obligations under any Credit Document to
which it is a party.
7.07 Compliance with Environmental Laws. (a) Holdings will pay, and
----------------------------------
will cause each of its Subsidiaries to pay, all costs and expenses incurred by
it in keeping in compliance with all Environmental Laws, and will keep or cause
to be kept all Real Properties free and clear of any Liens imposed pursuant to
such Environmental Laws; and (b) neither Holdings nor any of its Subsidiaries
will generate, use, treat, store, release or dispose of, or permit the
generation, use, treatment, storage, release or disposal of, Hazardous Materials
on any Real Property, or transport or permit the transportation of Hazardous
Materials to or from any such Real Property, unless the failure to comply with
the requirements specified in clause (a) or (b) above, either individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect. If Holdings or any of its Subsidiaries, or any tenant or occupant of
any Real Property, cause or permit any intentional or unintentional act or
omission resulting in the presence or Release of any Hazardous Material (except
in compliance with applicable Environmental Laws), each of Holdings and the
Borrower agrees to undertake, and/or to cause any of its Subsidiaries, tenants
or occupants to undertake, at their sole expense, any clean up, removal,
remedial or other action required pursuant to Environmental Laws to remove and
clean up any Hazardous Materials from any Real Property except where the failure
to do so would not be reasonably expected to have a Material Adverse Effect;
provided, that neither Holdings nor any of its Subsidiaries shall be required to
- --------
comply with any such order or directive which is being contested in good faith
and by proper proceedings so long as it has maintained adequate reserves with
respect to such compliance to the extent required in accordance with GAAP.
7.08 ERISA. As soon as possible and, in any event, within 10 days
-----
after Holdings or any Subsidiary of Holdings or any ERISA Affiliate knows or has
reason to know of the occurrence of any of the following events to the extent
that one or more of such events is reasonably likely to result in a material
liability to Holdings or any Subsidiary of Holdings, Holdings will deliver to
each of the Banks a certificate of the chief financial officer or other
Authorized Officer of Holdings setting forth details as to such occurrence and
the action, if any, which Holdings, such Subsidiary or such ERISA Affiliate is
required or proposes to take, together with any notices required or proposed to
be given to or filed with or by Holdings, such Subsidiary, such ERISA Affiliate,
the PBGC, a Plan participant or the Plan administrator with respect thereto:
that a Reportable Event has occurred, that an accumulated funding deficiency has
been incurred or an application may be or has been made to the Secretary of the
Treasury for a waiver or modification of the minimum funding standard (including
any required installment payments) or an extension of any amortization period
under Section 412 of the Code with respect to a Plan; that a contribution
required to be made to a Plan or Foreign Pension Plan has not been timely made;
that a Plan has been or may be terminated, reorganized, partitioned or
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<PAGE>
declared insolvent under Title IV of ERISA; that a Plan has an Unfunded Current
Liability giving rise to a lien under ERISA or the Code; that proceedings may be
or have been instituted to terminate or appoint a trustee to administer a Plan;
that a proceeding has been instituted pursuant to Section 515 of ERISA to
collect a delinquent contribution to a Plan; that Holdings, any Subsidiary of
Holdings or any ERISA Affiliate will or may incur any liability (including any
contingent or secondary liability) to or on account of the termination of or
withdrawal from a Plan under Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212
of ERISA or with respect to a Plan under Section 401(a)(29), 4971, 4975 or 4980
of the Code or Section 409, 502(i) or 502(l) of ERISA; or that Holdings or any
Subsidiary of Holdings has or may incur any liability under any employee welfare
benefit plan (within the meaning of Section 3(1) of ERISA) that provides
benefits to retired employees or other former employees (other than as required
by Section 601 of ERISA) or any employee pension benefit plan (as defined in
Section 3(2) of ERISA). At the request of any Bank, Holdings will deliver to
such Bank a complete copy of the annual report (Form 5500) of each Plan required
to be filed with the Internal Revenue Service. In addition, at the request of
any Bank, copies of annual reports and any notices received by Holdings or any
Subsidiary of Holdings or any ERISA Affiliate with respect to any Plan or
Foreign Pension Plan shall be delivered to such Bank no later than 10 days after
the date of any such request.
7.09 Good Repair. Holdings will, and will cause each of its
-----------
Subsidiaries to, ensure that its material properties and equipment used in its
business are kept in good repair, working order and condition, normal wear and
tear and damage by casualty excepted, and, subject to Section 8.08, that from
time to time there are made in such properties and equipment all needful and
proper repairs, renewals, replacements, extensions, additions, betterments and
improvements thereto, to the extent and in the manner useful or customary for
companies in similar businesses.
7.10 End of Fiscal Years; Fiscal Quarters. Holdings will, for
------------------------------------
financial reporting purposes, cause (i) each of its, and each of its
Subsidiaries', fiscal years to end on December 31 of each year, provided that
the fiscal year of Wesley-Jessen (Puerto Rico) shall end on November 30 of each
year and (ii) each of its, and each of its Subsidiaries', fiscal quarters to end
on dates which are consistent with a fiscal year ending on December 31, provided
that the fiscal quarters of Wesley-Jessen (Puerto Rico) shall end on dates which
are consistent with a fiscal year ending on November 30.
7.11 Additional Security; Further Assurances. (a) Holdings will,
---------------------------------------
and will cause each of its Domestic Subsidiaries (and to the extent that Section
7.15 is operative, each of its Foreign Subsidiaries) to, grant to the Collateral
Agent security interests and mortgages in such assets and properties of Holdings
and its Subsidiaries as are not covered by the Security Documents, and as may be
requested from time to time by the Agent or the Required Banks (collectively,
the "Additional Security Documents"). All such security interests and mortgages
shall be granted pursuant to documentation reasonably satisfactory in form and
substance to the Agent and shall constitute valid and enforceable perfected
security interests and mortgages superior to and prior to the rights of all
third Persons and subject to no other Liens except for
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<PAGE>
Permitted Liens. The Additional Security Documents or instruments related
thereto shall have been duly recorded or filed in such manner and in such places
as are required by law to establish, perfect, preserve and protect the Liens in
favor of the Collateral Agent required to be granted pursuant to the Additional
Security Documents and all taxes, fees and other charges payable in connection
therewith shall have been paid in full.
(b) Holdings will, and will cause each of its Subsidiaries to, at the
expense of Holdings and the Borrower, make, execute, endorse, acknowledge, file
and/or deliver to the Collateral Agent from time to time such vouchers,
invoices, schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, real
property surveys, reports and other assurances or instruments and take such
further steps relating to the collateral covered by any of the Security
Documents as the Collateral Agent may reasonably require. Furthermore, Holdings
shall cause to be delivered to the Collateral Agent such opinions of counsel,
title insurance and other related documents as may be reasonably requested by
the Agent to assure themselves that this Section 7.11 has been complied with.
(c) If the Agent or the Required Banks determine that they are
required by law or regulation to have appraisals prepared in respect of the Real
Property of Holdings and its Subsidiaries constituting Collateral, the Borrower
shall provide to the Agent appraisals which satisfy the applicable requirements
of the Real Estate Appraisal Reform Amendments of the Financial Institution
Reform, Recovery and Enforcement Act of 1989 and which shall be in form and
substance satisfactory to the Agent.
(d) Holdings and the Borrower agree that each action required above
by this Section 7.11 shall be completed as soon as possible, but in no event
later than 90 days after such action is either requested to be taken by the
Agent or the Required Banks or required to be taken by Holdings and its
Subsidiaries pursuant to the terms of this Section 7.11; provided that in no
--------
event shall Holdings or the Borrower be required to take any action, other than
using its reasonable efforts, to obtain consents from third parties with respect
to its compliance with this Section 7.11.
7.12 Interest Rate Protection. The Borrower shall no later than 90
------------------------
days following the Initial Borrowing Date enter into, and thereafter maintain,
Interest Rate Protection Agreements, satisfactory to the Agent, with a term of
at least three years, establishing a fixed or maximum interest rate acceptable
to the Agent in respect of at least 50% of the outstanding Term Loans.
7.13 Register. The Borrower hereby designates the Agent to serve as
--------
the Borrower's agent, solely for purposes of this Section 7.13, to maintain a
register (the "Register") on which it will record the Commitments from time to
time of each of the Banks, the Loans made by each of the Banks and each
repayment in respect of the principal amount of the Loans of each Bank. Failure
to make any such recordation, or any error in such recordation shall not affect
the Borrower's obligations in respect of such Loans. With respect
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<PAGE>
to any Bank, the transfer of the Commitments of such Bank and the rights to the
principal of, and interest on, any Loan made pursuant to such Commitments shall
not be effective until such transfer is recorded on the Register maintained by
the Agent with respect to ownership of such Commitments and Loans and prior to
such recordation all amounts owing to the transferor with respect to such
Commitments and Loans shall remain owing to the transferor. The registration of
assignment or transfer of all or part of any Commitments and Loans shall be
recorded by the Agent on the Register only upon the acceptance by the Agent of a
properly executed and delivered Assignment and Assumption Agreement pursuant to
Section 12.04(b). Coincident with the delivery of such an Assignment and
Assumption Agreement to the Agent for acceptance and registration of assignment
or transfer of all or part of a Loan, or as soon thereafter as practicable, the
assigning or transferor Bank shall surrender the Note evidencing such Loan, and
thereupon one or more new Notes in the same aggregate principal amount shall be
issued to the assigning or transferor Bank and/or the new Bank. The Borrower
agrees to indemnify the Agent from and against any and all losses, claims,
damages and liabilities of whatsoever nature which may be imposed on, asserted
against or incurred by the Agent in performing its duties under this Section
7.13.
7.14 Maintenance of Corporate Separateness. Holdings will, and will
-------------------------------------
cause each of its Subsidiaries to, satisfy customary corporate formalities,
including the maintenance of corporate records. Neither the Borrower nor any
Subsidiary of the Borrower shall make any payment to a creditor of Holdings
(other than a Guaranteed Creditor pursuant to any Credit Document or an Interest
Rate Protection Agreement or Other Hedging Agreement entered into with any such
Guaranteed Creditor) in respect of any liability of Holdings, and no bank
account of Holdings shall be commingled with any bank account of the Borrower or
any Subsidiary of the Borrower. Any financial statements distributed to any
creditors of Holdings shall, to the extent permitted by GAAP, clearly establish
the corporate separateness of Holdings from the Borrower and each of the
Borrower's Subsidiaries. Finally, neither the Borrower nor any of its
Subsidiaries shall take any action, or conduct its affairs in a manner, which is
likely to result in the corporate existence of Holdings on the one hand and of
the Borrower or any Subsidiary of the Borrower on the other hand being ignored,
or in the assets and liabilities of the Borrower or any Subsidiary of the
Borrower being substantively consolidated with those of Holdings in a
bankruptcy, reorganization or other insolvency proceeding.
7.15 Foreign Subsidiaries Security. If following a change in the
-----------------------------
relevant sections of the Code or the regulations, rules, rulings, notices or
other official pronouncements issued or promulgated thereunder, counsel for the
Borrower acceptable to the Agent and the Required Banks does not within 30 days
after a request from the Agent or the Required Banks deliver evidence, in form
and substance mutually satisfactory to the Agent and the Borrower, with respect
to any Foreign Subsidiary which has not already had all of
its stock pledged pursuant to the Pledge Agreement that (i) a pledge (x) of 66-
2/3% or more of the total combined voting power of all classes of capital stock
of such Foreign Subsidiary entitled to vote, and (y) of any promissory note
issued by such Foreign Subsidiary to Holdings or any of its Domestic
Subsidiaries, (ii) the entering into by such Foreign Subsidiary of a security
agreement in substantially the form of the Security Agreement and (iii) the
entering into by such
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<PAGE>
Foreign Subsidiary of a guaranty in substantially the form of the Subsidiary
Guaranty, in any such case could reasonably be expected to cause (I) the
undistributed earnings of such Foreign Subsidiary as determined for Federal
income tax purposes to be treated as a deemed dividend to such Foreign
Subsidiary's United States parent for Federal income tax purposes or (II) other
material adverse federal income tax consequences to the Credit Parties, then in
the case of a failure to deliver the evidence described in clause (i) above,
that portion of such Foreign Subsidiary's outstanding capital stock or any
promissory notes so issued by such Foreign Subsidiary, in each case not
theretofore pledged pursuant to the Pledge Agreement shall be pledged to the
Collateral Agent for the benefit of the Secured Creditors pursuant to the Pledge
Agreement (or another pledge agreement in substantially similar form, if
needed), and in the case of a failure to deliver the evidence described in
clause (ii) above, such Foreign Subsidiary shall execute and deliver the
Security Agreement (or another security agreement in substantially similar form,
if needed), granting the Secured Creditors a security interest in all of such
Foreign Subsidiary's assets and securing the Obligations of the Borrower under
the Credit Documents and under any Interest Rate Protection Agreement or Other
Hedging Agreement and, in the event the Subsidiary Guaranty shall have been
executed by such Foreign Subsidiary, the obligations of such Foreign Subsidiary
thereunder, and in the case of a failure to deliver the evidence described in
clause (iii) above, such Foreign Subsidiary shall execute and deliver the
Subsidiary Guaranty (or another guaranty in substantially similar form, if
needed), guaranteeing the Obligations of the Borrower under the Credit Documents
and under any Interest Rate Protection Agreement or Other Hedging Agreement, in
each case to the extent that the entering into such Security Agreement or
Subsidiary Guaranty is permitted by the laws of the respective foreign
jurisdiction and with all documents delivered pursuant to this Section 7.15 to
be in form and substance reasonably satisfactory to the Agent and the Required
Banks.
7.16 Contributions; Payments. (a) Holdings will contribute as an
-----------------------
equity contribution to the capital of the Borrower upon its receipt thereof, any
cash proceeds (net of reasonable costs associated with such sale or issuance)
received by Holdings from any sale or issuance of its preferred or common equity
or any cash capital contributions received by Holdings, provided that (i) to the
--------
extent permitted by Section 8.05(s), Holdings may lend proceeds of Permitted
Equity Proceeds to the Borrower and (ii) to the extent permitted by Section
8.12(i), Holdings may use the proceeds of a registered public offering of
Holdings Common Stock to prepay in full the Seller Subordinated Note.
(b) The Borrower will use the proceeds of all equity contributions
received by it from Holdings as provided in clause (a) above toward the
repayment of Term Loans to the extent required by Section 4.02.
7.17 Name Changes. Holdings and the Borrower shall cause those (x)
------------
Domestic Subsidiaries set forth on Annex IX to change their corporate names to
the respective new corporate names appearing opposite such Domestic Subsidiaries
on Annex IX within fifteen Business Days following the Initial Borrowing Date
and (y) Foreign Subsidiaries set forth on Annex IX to change their corporate
names to the respective new corporate names
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<PAGE>
appearing opposite such Foreign Subsidiaries on Annex IX within 120 Business
Days following the Initial Borrowing Date.
SECTION 8. Negative Covenants. Holdings and the Borrower hereby
------------------
covenant and agree that as of the Effective Date and thereafter for so long as
this Agreement is in effect and until the Commitments have terminated, no
Letters of Credit (other than Letters of Credit, together with all Fees that
have accrued and will accrue thereon through the stated termination date of such
Letters of Credit, which have been supported in a manner satisfactory to the
respective Letter of Credit Issuer in its sole and absolute discretion) or Notes
are outstanding and the Loans and Unpaid Drawings, together with interest, Fees
and all other Obligations (other than any indemnities described in Section 12.13
hereof which are not then due and payable) incurred hereunder, are paid in full:
8.01 Changes in Business. (a) Holdings and its Subsidiaries will
-------------------
not engage in any business other than the business engaged in by Holdings and
its Subsidiaries (including, without limitation, the Acquired Business) as of
the Effective Date and activities directly related thereto, and similar or
related businesses.
(b) Notwithstanding the foregoing, Holdings will engage in no
business other than (i) its ownership of the capital stock of the Borrower,
those obligations of officers and employees of Holdings and its Subsidiaries to
the extent permitted by Section 8.05(e) and having those liabilities which it is
responsible for under this Agreement and the other Documents to which it is a
party and Borrower Subordinated Notes, (ii) the issuance of the Seller
Subordinated Notes, Permitted Holdings PIK Securities, shares of Holdings Common
Stock and options and warrants to purchase Holdings Common Stock and shares of
Holdings Class L Common Stock and options and warrants to purchase Holdings
Class L Common Stock, (iii) Permitted Strategic Equity Issuances and (iv)
activities associated with expenses paid with dividends made by the Borrower
pursuant to Section 8.06(iii). Notwithstanding the foregoing, Holdings may
engage in those activities that are incidental to (a) the maintenance of its
corporate existence in compliance with applicable law, (b) legal, tax and
accounting matters in connection with any of the foregoing activities and (c)
the entering into, and performing its obligations under, this Agreement and the
other Documents to which it is a party.
8.02 Consolidation, Merger, Sale or Purchase of Assets, etc.
-------------------------------------------------------
Holdings will not, and will not permit any of its Subsidiaries to, wind up,
liquidate or dissolve its affairs or enter into any transaction of merger or
consolidation, or convey, sell, lease or otherwise dispose of (or agree to do
any of the foregoing at any future time) all or any part of its property or
assets (other than inventory in the ordinary course of business through
distribution arrangements, vendor financial service programs or otherwise), or
enter into any partnerships, joint ventures or sale-leaseback transactions, or
purchase or otherwise acquire (in one or a series of related transactions) any
part of the property or assets (other than purchases or other acquisitions of
inventory, materials and equipment in the ordinary course of business) of any
Person, except that the following shall be permitted:
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(a) the Acquisition;
(b) the Borrower and its Subsidiaries may lease as lessee or lessor
or license as licensee or licensor real or personal property in the
ordinary course of business and otherwise in compliance with this
Agreement, so long as any such lease or license by the Borrower or any of
its Subsidiaries in its capacity as lessor or licensor, as the case may be,
does not prohibit the granting of a Lien by the Borrower or any of its
Subsidiaries pursuant to the Mortgages in the real property covered by such
lease or pursuant to the Security Agreement in the personal property
covered by such lease or license, as the case may be;
(c) Capital Expenditures by the Borrower and its Subsidiaries to the
extent not in violation of Section 8.08;
(d) the advances, investments and loans permitted pursuant to Section
8.05;
(e) the Borrower and its Subsidiaries may sell or discount, in each
case without recourse, accounts receivables arising in the ordinary course
of business, but only in connection with the compromise or collection
thereof;
(f) the Borrower and its Subsidiaries may sell or exchange specific
items of equipment, so long as the purpose of each such sale or exchange is
to acquire (and results within 180 days of such sale or exchange in the
acquisition of) replacement items of equipment which are, in the reasonable
business judgment of the Borrower and its Subsidiaries, the functional
equivalent of the item of equipment so sold or exchanged;
(g) the Borrower and its Subsidiaries may, in the ordinary course of
business, license as licensee or licensor patents, trademarks, copyrights
and know-how to or from third Persons, so long as any such license by the
Borrower or any of its Subsidiaries in its capacity as licensor is
permitted to be assigned pursuant to the Security Agreement (to the extent
that a security interest in such patents, trademarks, copyrights and know-
how is granted thereunder) and does not otherwise prohibit the granting of
a Lien by the Borrower or any of its Subsidiaries pursuant to the Security
Agreement in the intellectual property covered by such license;
(h) any Foreign Subsidiary may be merged with and into, or be
dissolved or liquidated into, or transfer any of its assets to, any Wholly-
Owned Foreign Subsidiary so long as (i) such Wholly-Owned Foreign
Subsidiary is the surviving corporation of any such merger, dissolution or
liquidation and (ii) in each case at least 65% of the total combined voting
power of all classes of capital stock of all first-tier Foreign
Subsidiaries are pledged pursuant to the Pledge Agreement;
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<PAGE>
(i) the assets of any Foreign Subsidiary may be transferred to the
Borrower or any of its Wholly-Owned Domestic Subsidiaries, and any Foreign
Subsidiary may be merged with and into, or be dissolved or liquidated into,
the Borrower or any of its Wholly-Owned Domestic Subsidiaries so long as
the Borrower or such Wholly-Owned Domestic Subsidiary is the surviving
corporation of any such merger, dissolution or liquidation;
(j) the Borrower or any of its Wholly-Owned Domestic Subsidiaries may
transfer to one or more Wholly-Owned Foreign Subsidiaries those assets
theretofore transferred to the Borrower or such Wholly-Owned Domestic
Subsidiary by a Foreign Subsidiary (whether by merger, liquidation,
dissolution or otherwise) pursuant to clause (i) of this Section 8.02;
(k) the Borrower and its Subsidiaries may sell or otherwise transfer
inventory to their respective Subsidiaries for resale by such Subsidiaries,
and Subsidiaries of the Borrower may sell or otherwise transfer inventory
to the Borrower for resale by the Borrower so long as the security interest
granted to the Collateral Agent for the benefit of the Secured Creditors
pursuant to the Security Agreement in the inventory so transferred (or the
proceeds thereof, in the case of a transfer to a Foreign Subsidiary) shall
remain in full force and effect and perfected (to at least the same extent
as in effect immediately prior to such transfer);
(l) the Borrower may contribute cash to one or more Wholly-Owned
Domestic Subsidiaries formed after the Initial Borrowing Date in accordance
with Section 8.14, so long as the aggregate amount of such cash so
contributed to all such Domestic Subsidiaries does not exceed $1,000,000;
(m) the Borrower and its Domestic Subsidiaries may transfer assets
(other than inventory) to Wholly-Owned Foreign Subsidiaries so long as the
aggregate fair market value of all such assets so transferred (determined
in good faith by the Board of Directors or senior management of the
Borrower) to all such Foreign Subsidiaries does not exceed $5,000,000;
(n) assets of the Borrower and its Domestic Subsidiaries (other than
any Domestic Subsidiary owning assets or having operations in Puerto Rico)
constituting non-U.S. operations may be transferred to Wholly-Owned Foreign
Subsidiaries of the Borrower;
(o) each of the Borrower and its Subsidiaries may sell assets,
provided that (x) the aggregate sale of proceeds from all assets subject to
--------
such sales pursuant to this clause (o) shall not exceed $1,000,000 in any
fiscal year of the Borrower, (y) any such asset sale is for at least 80% in
cash and at fair market value (as determined in good faith by the Board of
Directors or senior management of the Borrower) and (z) the Net
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Proceeds therefrom are either applied to repay Term Loans as provided in
Section 4.02(A)(c) or reinvested to the extent permitted by Section
4.02(A)(c);
(p) each of the Borrower and its Subsidiaries may sell other assets,
provided that the aggregate sale proceeds from all assets subject to such
--------
sales pursuant to this clause (p) shall not exceed $250,000 in any fiscal
year of the Borrower;
(q) so long as no Default or Event of Default then exists or would
result therefrom, the Borrower may acquire assets or the capital stock of
any Person (any such acquisition permitted by this clause (q), a "Permitted
Acquisition"), provided, that (i) such Person (or the assets so acquired)
--------
was, immediately prior to such acquisition, engaged (or used) primarily in
the businesses permitted pursuant to Section 8.01(a), (ii) if such
acquisition is structured as a stock acquisition, then either (A) the
Person so acquired becomes a Wholly-Owned Subsidiary of the Borrower or (B)
such Person is merged with and into the Borrower or a Wholly-Owned
Subsidiary of the Borrower (with the Borrower or such Wholly-Owned
Subsidiary being the surviving corporation of such merger), and in any
case, all of the provisions of Section 8.14 have been complied with in
respect of such Person, (iii) any Liens or Indebtedness assumed or issued
in connection with such acquisition are otherwise permitted under Section
8.03 or 8.04, as the case may be, (iv) the only consideration paid in
connection with such Permitted Acquisition consists of cash, Holdings
Common Stock and/or Permitted Holdings PIK Securities, (v) the aggregate
amount of cash, Holdings Common Stock (valued in good faith by the Board of
Directors or senior management of Holdings or, to the extent such Holdings
Common Stock represents more than $5,000,000 of the total consideration
paid in connection with such Permitted Acquisition, by an independent
financial institution or appraisal firm reasonably satisfactory to the
Agent or, after the initial public offering of Holdings Common Stock, based
on the then current trading price for such Holdings Common Stock) and
Permitted Holdings PIK Securities (valued at the aggregate liquidation
preference thereof in the case of preferred stock and the aggregate face
amount thereof in the case of indebtedness) expended by the Borrower in
connection with any such acquisition (or series of related acquisitions)
shall not exceed $15,000,000 (or, at any time during a Reduced Leveraged
Period, $25,000,000) and (vi) the aggregate amount of cash expended by the
Borrower in connection with any such acquisition (or series of related
acquisitions) shall not exceed an amount equal to the sum of (x) $6,500,000
(or, at any time during a Reduced Leverage Period, $14,000,000) less the
aggregate amount of such $6,500,000 (or $14,000,000, as the case may be)
previously utilized to make Permitted Acquisitions or to make investments
under Section 8.05(w)(A) plus (y) the Excess Proceeds Amount at the time of
such acquisition;
(r) any Domestic Subsidiary of the Borrower may transfer assets
(other than accounts receivable and inventory) to the Borrower or to any
other Wholly-Owned Domestic Subsidiary of the Borrower so long as the
security interests granted to the Collateral Agent for the benefit of the
Secured Creditors pursuant to the Security
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Documents in the assets so transferred shall remain in full force and
effect and perfected (to at least the same extent as in effect immediately
prior to such transfer);
(s) any Wholly-Owned Domestic Subsidiary of the Borrower may merge
with and into the Borrower so long as (i) the Borrower is the surviving
corporation of such merger and (ii) the security interests granted to the
Collateral Agent for the benefit of the Secured Creditors pursuant to the
Security Documents in the assets of such Wholly-Owned Domestic Subsidiary
so merged shall remain in full force and effect and perfected (to at least
the same extent as in effect immediately prior to such merger);
(t) any Domestic Subsidiary of the Borrower may merge with and into,
or be dissolved or liquidated into, any other Wholly-Owned Domestic
Subsidiary of the Borrower so long as (i) such Wholly-Owned Domestic
Subsidiary of the Borrower is the surviving corporation of such merger,
dissolution or liquidation and (ii) the security interests granted to the
Collateral Agent for the benefit of the Secured Creditors pursuant to the
Security Documents in the assets of such Domestic Subsidiary shall remain
in full force and effect and perfected (to at least the same extent as in
effect immediately prior to such merger, dissolution or liquidation);
(u) the Borrower and its Subsidiaries may effect the Designated Real
Property Sale, provided that the Designated Real Property Sale is for at
--------
least 80% in cash and at fair market value (as determined in good faith by
the Board of Directors or senior management of the Borrower);
(v) the Borrower and its Subsidiaries may effect any West Coast Asset
Sale, provided that (x) any such West Coast Asset Sale is for at least 80%
--------
in cash and at fair market value (as determined in good faith by the Board
of Directors or senior management of the Borrower) and (y) the Net Proceeds
therefrom are either applied to repay Term Loans as provided in Section
4.02(A)(c) or reinvested to the extent permitted by Section 4.02(A)(c);
(w) the Borrower and its Subsidiaries may, in the ordinary course of
business, sell, transfer or otherwise dispose of assets (including, without
limitation, patents, trademarks, copyrights and know-how) which, in the
reasonable judgment of the Borrower or such Subsidiary, are determined to
be uneconomical, negligible or obsolete in the conduct of its business;
(x) (I) the Borrower and/or its Subsidiaries may enter into
factoring arrangements with respect to accounts receivable arising in Japan
in connection with business activities therein, (II) the Borrower and its
Domestic Subsidiaries may sell or otherwise transfer accounts receivable
between or among themselves in the ordinary course of business, and (III)
Foreign Subsidiaries may sell or otherwise transfer accounts receivable
between or among themselves in the ordinary course of business;
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(y) the Permitted Sale-Leaseback Transaction shall be permitted so
long as (I) the Net Proceeds therefrom are either applied to repay Term
Loans as provided in Section 4.02(A)(c) or reinvested to the extent
permitted by Section 4.02(A)(c) and (II) the lease obligations created
thereby are otherwise permitted under this Agreement; and
(z) the Borrower and its subsidiaries may transfer or divest of the
Natural Touch brand name and the assets related thereto; and
(aa) the Borrower and its Subsidiaries may sell those assets listed
on Annex XIV, provided that (x) any such asset sale is for at least 80% in
--------
cash and at fair market value (as determined in good faith by the Board of
Directors or senior management of the Borrower) and (y) the Net Proceeds
therefrom are either applied to repay Term Loans as provided in Section
4.02(A)(c) or reinvested to the extent permitted by Section 4.02(A)(c).
To the extent the Required Banks waive the provisions of this Section 8.02 with
respect to the sale or other disposition of any Collateral, or any Collateral is
sold as permitted by this Section 8.02 (and such Collateral is permitted to be
released from the Liens created by the respective Security Document), such
Collateral in each case shall be sold or otherwise disposed of free and clear of
the Liens created by the Security Documents and the Agent shall take such
actions (including, without limitation, directing the Collateral Agent to take
such actions) as are appropriate in connection therewith.
8.03 Liens. Holdings will not, and will not permit any of its
-----
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with
respect to any property or assets of any kind (real or personal, tangible or
intangible) of Holdings or any of its Subsidiaries, whether now owned or
hereafter acquired, or sell any such property or assets subject to an
understanding or agreement, contingent or otherwise, to repurchase such property
or assets (including sales of accounts receivable or notes with recourse to
Holdings or any of its Subsidiaries) or assign any right to receive income,
except for the following (collectively, the "Permitted Liens"):
(a) inchoate Liens for taxes, assessments or governmental charges or
levies not yet due or Liens for taxes, assessments or governmental charges
or levies being contested in good faith by appropriate proceedings and for
which adequate reserves have been established in accordance with GAAP;
(b) Liens in respect of property or assets of the Borrower or any of
its Subsidiaries imposed by law which were incurred in the ordinary course
of business and which have not arisen to secure Indebtedness for borrowed
money, such as carriers', warehousemen's and mechanics' Liens, statutory
landlord's Liens, and other similar Liens arising in the ordinary course of
business, and which either (x) do not in the aggregate materially detract
from the value of such property or assets or materially impair the use
thereof in the operation of the business of the Borrower or any of its
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Subsidiaries or (y) are being contested in good faith by appropriate
proceedings, which proceedings have the effect of preventing the forfeiture
or sale of the property or asset subject to such Lien;
(c) Liens created by or pursuant to this Agreement and the Security
Documents;
(d) Liens in existence on the Initial Borrowing Date which are
listed, and the property subject thereto described, in Annex VIII, without
giving effect to any extensions or renewals thereof;
(e) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 9.09;
(f) Liens incurred or deposits made (x) in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, government
contracts, performance and return-of-money bonds and other similar
obligations incurred in the ordinary course of business (exclusive of
obligations in respect of the payment for borrowed money); and (y) to
secure the performance of leases of Real Property, to the extent incurred
or made in the ordinary course of business consistent with past practices;
(g) licenses, leases or subleases granted to third Persons not
interfering in any material respect with the business of the Borrower or
any of its Subsidiaries;
(h) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the ordinary conduct of the
business of the Borrower or any of its Subsidiaries;
(i) Liens arising from precautionary UCC financing statements
regarding operating leases permitted by this Agreement;
(j) any interest or title of a licensor, lessor or sublessor under
any lease permitted by this Agreement;
(k) Permitted Encumbrances;
(l) Liens arising pursuant to purchase money mortgages, Capital
Leases or security interests securing Indebtedness representing the
purchase price (or financing of the purchase price within 90 days after the
respective purchase) of assets acquired after the Initial Borrowing Date,
provided that (i) any such Liens attach only to the assets so purchased,
--------
(ii) the Indebtedness secured by any such Lien does not exceed 100%, nor is
less than 70%, of the lesser of the fair market value or the purchase price
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of the property being purchased at the time of the incurrence of such
Indebtedness and (iii) the Indebtedness secured thereby is permitted to be
incurred pursuant to Section 8.04(d);
(m) Liens on property or assets acquired pursuant to a Permitted
Acquisition, or on property or assets of a Subsidiary of the Borrower in
existence at the time such Subsidiary is acquired pursuant to a Permitted
Acquisition, provided that (i) any Indebtedness that is secured by such
--------
Liens is permitted to exist under Section 8.04(j), and (ii) such Liens are
not incurred in contemplation of such Permitted Acquisition and do not
attach to any other asset of the Borrower or any of its Subsidiaries;
(n) Liens securing Indebtedness permitted pursuant to, and subject to
the limitations set forth in, clause (x) of Section 8.04(h), so long as any
such Lien attaches only to the assets of the respective Foreign Subsidiary
which is the obligor under such Indebtedness;
(o) Liens upon or with respect to inventory arising pursuant to
agreements to repurchase such inventory, provided that any such Liens
--------
attach only to the subject inventory and are created in the ordinary course
of business; and
(p) additional Liens incurred by the Borrower and its Subsidiaries so
long as the value of the property subject to such Liens, and the
Indebtedness and other obligations secured thereby, do not exceed
$1,000,000.
8.04 Indebtedness. Holdings will not, and will not permit any of its
------------
Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement and the other
Credit Documents;
(b) Existing Indebtedness outstanding on the Initial Borrowing Date
and listed on Annex VII, without giving effect to any subsequent extension,
renewal or refinancing thereof, except as permitted by Section 8.05(t);
(c) Indebtedness under Interest Rate Protection Agreements entered
into to protect the Borrower against fluctuations in interest rates in
respect of the Obligations;
(d) Capitalized Lease Obligations and Indebtedness of the Borrower
and its Subsidiaries incurred pursuant to purchase money Liens, provided,
--------
that (x) all such Capitalized Lease Obligations are permitted under Section
8.08 and (y) the sum of (i) the aggregate Capitalized Lease Obligations
plus (ii) the aggregate principal amount of such purchase money
Indebtedness outstanding at any time (A) during the period (taken as one
accounting period) from the Effective Date and ending on December 31, 1997,
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shall not exceed $5,000,000, and (B) during any fiscal year of the Borrower
thereafter shall not exceed the amount set forth opposite such fiscal year
as set forth below:
<TABLE>
<CAPTION>
Fiscal Year Ending Amount
------------------ ------
<S> <C>
December 31, 1998 $6,000,000
December 31, 1999 $7,000,000
December 31, 2000 $8,000,000
Thereafter $9,000,000
</TABLE>
(e) Indebtedness constituting Intercompany Loans to the extent
permitted by Section 8.05(g);
(f) Indebtedness of Holdings under the Shareholder Subordinated
Notes;
(g) Indebtedness under Other Hedging Agreements providing protection
against fluctuations in currency values in connection with the Borrower's
or any of its Subsidiaries' operations so long as management of the
Borrower or such Subsidiary, as the case may be, has determined that the
entering into of such Other Hedging Agreements are bona fide hedging
---- ----
activities;
(h) Indebtedness (x) of Foreign Subsidiaries under lines of credit
extended by third Persons to any such Foreign Subsidiary the proceeds of
which Indebtedness are used for such Foreign Subsidiary's working capital
purposes, provided that (1) the aggregate principal amount of all such
--------
Indebtedness outstanding at any time for all Foreign Subsidiaries shall not
exceed $30,000,000 (the "Foreign Subsidiary Working Capital Indebtedness"),
(2) the aggregate principal amount of Foreign Subsidiary Working Capital
Indebtedness secured by Liens permitted under Section 8.03(n) shall not
exceed $15,000,000 and (3) the aggregate principal amount of Foreign
Subsidiary Working Capital Indebtedness supported by Letters of Credit
shall not exceed $15,000,000, and (y) consisting of unsecured guaranties in
an aggregate principal amount not to exceed $15,000,000 by the Borrower or
any Foreign Subsidiary of any such Foreign Subsidiary Working Capital
Indebtedness;
(i) Indebtedness of Foreign Subsidiaries to the Borrower and its
Domestic Subsidiaries as a result of any investment made pursuant to
Section 8.05(o);
(j) Indebtedness of a Subsidiary acquired pursuant to a Permitted
Acquisition (or Indebtedness assumed at the time of a Permitted Acquisition
of an asset securing such Indebtedness), provided that (i) such
--------
Indebtedness was not incurred in connection with or in anticipation of such
Permitted Acquisition, (ii) such Indebtedness does not constitute debt for
borrowed money (other than debt for borrowed money incurred in connection
with industrial revenue or industrial development bond financings), it
being understood and agreed that Capitalized Lease Obligations and purchase
money
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<PAGE>
Indebtedness shall not constitute debt for borrowed money for purposes of
this clause (j), and (iii) at the time of such Permitted Acquisition such
Indebtedness does not exceed 10% of the total value of the assets of the
Subsidiary so acquired, or of the asset so acquired, as the case may be;
(k) Indebtedness consisting of guaranties (x) by the Borrower of
Indebtedness, leases and other obligations permitted to be incurred by
Domestic Wholly-Owned Subsidiaries, (y) by Domestic Subsidiaries of
Indebtedness, leases and other obligations permitted to be incurred by the
Borrower or other Domestic Wholly-Owned Subsidiaries and (z) by Foreign
Subsidiaries of Indebtedness, leases and other obligations permitted to be
incurred by other Foreign Wholly-Owned Subsidiaries;
(l) Indebtedness of Holdings incurred under the Seller Subordinated
Note in an aggregate amount not to exceed $5,000,000 (as reduced by any
repayments of principal thereof) plus additional indebtedness of Holdings
incurred under the Seller Subordinated Note representing accrued but unpaid
interest thereon; provided, however, that no such indebtedness incurred by
-------- -------
Holdings under the Seller Subordinated Note shall be guaranteed or
supported by the Borrower or any of its Subsidiaries;
(m) Indebtedness of the Borrower constituting Borrower Subordinated
Loans to the extent permitted by Section 8.05(s);
(n) Indebtedness of Holdings incurred under Permitted Holdings PIK
Securities, provided that the aggregate outstanding principal amount of
--------
Permitted Holding PIK Securities constituting Indebtedness shall not exceed
$10,000,000 (or, at any time during a Reduced Leverage Period, $15,000,000)
plus the amount of interest on such Permitted Holdings PIK Securities paid
in kind or through accretion;
(o) Indebtedness consisting of take-or-pay supply agreement entered
into by the Borrower and its Subsidiaries in the ordinary course of
business; and
(p) additional Indebtedness of the Borrower and its Domestic
Subsidiaries not otherwise permitted hereunder not exceeding $2,500,000, in
aggregate principal amount at any time outstanding.
8.05 Advances, Investments and Loans. Holdings will not, and will
-------------------------------
not permit any of its Subsidiaries to, lend money or credit or make advances to
any Person, or purchase or acquire any stock, obligations or securities of, or
any other interest in, or make any capital contribution to, any Person, or
purchase or own a futures contract or otherwise become liable for the purchase
or sale of currency or other commodities at a future date in the nature of a
futures contract, or hold any cash, Cash Equivalents or Foreign Cash
Equivalents, except:
(a) the Borrower and its Subsidiaries may invest in cash and Cash
Equivalents;
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<PAGE>
(b) the Borrower and its Subsidiaries may acquire and hold
receivables owing to it, if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade
terms of the Borrower or such Subsidiary;
(c) the Borrower and its Subsidiaries may acquire and own investments
(including debt obligations) received in connection with the bankruptcy or
reorganization of suppliers and customers and in good faith settlement of
delinquent obligations of, and other disputes with, customers and suppliers
arising in the ordinary course of business;
(d) Interest Rate Protection Agreements entered into in compliance
with Section 8.04(c) shall be permitted;
(e) Holdings may acquire and hold obligations of one or more officers
or other employees of Holdings or its Subsidiaries in connection with such
officers' or employees' acquisition of shares of Holdings Common Stock or
Holdings Class L Common Stock so long as no cash is paid by Holdings or any
of its Subsidiaries in connection with the acquisition of any such
obligations;
(f) deposits made in the ordinary course of business consistent with
past practices to secure the performance of leases shall be permitted;
(g) the Borrower may make intercompany loans and advances to any of
its Subsidiaries and any Subsidiary of the Borrower may make intercompany
loans and advances to the Borrower or any other Subsidiary of the Borrower
(collectively, "Intercompany Loans"), provided, that (v) at no time shall
--------
the aggregate outstanding principal amount of Intercompany Loans made
pursuant to this clause (g) by the Borrower and its Domestic Subsidiaries
to Foreign Subsidiaries the proceeds of which are used to finance Capital
Expenditures, when added to the amount of contributions, capitalizations
and forgiveness theretofore made pursuant to Section 8.05(l)(x), exceed
$8,000,000 (determined without regard to any write-downs or write-offs of
such loans and advances), provided that, in addition to such $8,000,000,
--------
Intercompany Loans the proceeds of which are used to finance Capital
Expenditures may also be made by the Borrower and its Domestic Subsidiaries
to Foreign Subsidiaries in an amount up to the Excess Proceeds Amount at
the time of any such loan, (w) at no time shall the aggregate outstanding
principal amount of all Intercompany Loans the proceeds of which are not
used to finance Capital Expenditures made pursuant to this clause (g) by
the Borrower and its Domestic Subsidiaries to Foreign Subsidiaries, when
added to the amount of contributions, capitalizations and forgiveness
theretofore made pursuant to Section 8.05(1)(y), exceed $15,000,000 minus
the aggregate outstanding principal amount of Intercompany Loans made
pursuant to clause (v) above (determined without regard to any write-downs
or write-offs of such loans and advances), provided that, in addition to
--------
such $15,000,000, such other Intercompany Loans may also be made by the
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Borrower and its Domestic Subsidiaries to Foreign Subsidiaries in an amount
up to the Excess Proceeds Amount at the time of any such loan, (x) each
Intercompany Loan made by a Foreign Subsidiary to the Borrower or a
Domestic Subsidiary shall contain the subordination provisions set forth on
Exhibit I, (y) each Intercompany Loan shall be evidenced by an Intercompany
Note and (z) each such Intercompany Note (other than (1) Intercompany Notes
issued by Foreign Subsidiaries to the Borrower or Domestic Subsidiaries and
(2) Intercompany Notes held by Foreign Subsidiaries) shall be pledged to
the Collateral Agent pursuant to the Pledge Agreement;
(h) loans and advances by the Borrower and its Subsidiaries to
employees of Holdings and its Subsidiaries for moving and travel expenses
and other similar expenses, in each case incurred in the ordinary course of
business, in an aggregate outstanding principal amount not to exceed
$3,000,000 at any time (determined without regard to any write-down or
write-offs of such loans and advances) shall be permitted;
(i) Holdings may make equity contributions to the capital of the
Borrower;
(j) Foreign Subsidiaries may invest in Foreign Cash Equivalents;
(k) Other Hedging Agreements may be entered into in compliance with
Section 8.04(g);
(l) the Borrower and its Domestic Subsidiaries may make cash capital
contributions to Foreign Subsidiaries, and may capitalize or forgive any
Indebtedness owed to them by a Foreign Subsidiary and outstanding under
clause (g) of this Section 8.05, provided that (x) the aggregate amount of
--------
such contributions, capitalizations and forgiveness the proceeds of which
are used to finance Capital Expenditures, when added to the aggregate
outstanding principal amount of Intercompany Loans made to Foreign
Subsidiaries under such clause (g)(v) (determined without regard to any
write-downs or write-offs thereof) shall not exceed an amount equal to
$8,000,000, provided that, in addition to such $8,000,000, such
--------
contributions, capitalizations and forgiveness may be made at any time in
an amount up to the Excess Proceeds Amount at such time and (y) the
aggregate amount of all such contributions, capitalizations and forgiveness
the proceeds of which are not used to finance Capital Expenditures, when
added to the aggregate outstanding principal amount of Intercompany Loans
made to Foreign Subsidiaries under such clause (g)(w) (determined without
regard to any write-downs or write-offs thereof) shall not exceed an amount
equal to $15,000,000, minus the aggregate amount of contributions,
capitalization and forgiveness pursuant to clause (x) above, provided that,
--------
in addition to such $15,000,000, such contributions, capitalizations and
forgiveness may be made at any time in an amount up to the Excess Proceeds
Amount at such time;
(m) Permitted Acquisitions shall be permitted;
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<PAGE>
(n) the Borrower and its Subsidiaries may make investments in their
respective Subsidiaries in connection with the transfers of those assets
permitted to be transferred pursuant to Sections 8.02(h), (i) and (j), it
being understood that the Borrower and its Subsidiaries may convert any
investment initially made as an equity investment to intercompany
Indebtedness held by the Borrower or such Subsidiary;
(o) the Borrower and its Domestic Subsidiaries may make and hold
investments in their respective Foreign Subsidiaries to the extent that
such investments arise from the sale of inventory in the ordinary course of
business by the Borrower or such Domestic Subsidiary to such Foreign
Subsidiaries for resale by such Foreign Subsidiaries (including any such
investments resulting from the extension of the payment terms with respect
to such sales);
(p) the Borrower and its Subsidiaries may hold additional investments
in their respective Subsidiaries to the extent that such investments
reflect an increase in the value of such Subsidiaries;
(q) the Borrower and its Subsidiaries may capitalize one or more
foreign sales corporations created in accordance with Section 8.14 with
cash contributions in an aggregate amount not to exceed $200,000 for all
such foreign sales corporations;
(r) the Borrower and its Subsidiaries may make transfers of assets to
their respective Subsidiaries in accordance with Section 8.02(i), (j), (k),
(l), (m), (n) and (r);
(s) Holdings may make intercompany loans to the Borrower on a
subordinated basis (collectively, "Borrower Subordinated Loans") so long as
(x) all such Borrower Subordinated Loans are evidenced by a Borrower
Subordinated Note and (y) the proceeds used by Holdings to make such
Borrower Subordinated Loans come from the Permitted Equity Proceeds;
(t) advances, loans and investments in existence on the Initial
Borrowing Date and listed on Annex XI shall be permitted, without giving
effect to any additions thereto or replacements thereof (except those
additions or replacements which are existing obligations as of the Initial
Borrowing Date), provided that those loans outstanding to Subsidiaries on
--------
the Initial Borrowing Date may be repaid and reborrowed so long as the
aggregate outstanding principal amount of all such loans does not exceed
that aggregate principal amount outstanding on the Initial Borrowing Date;
(u) the Borrower and its Subsidiaries may acquire and hold debt
and/or equity securities as partial consideration for a sale of assets
pursuant to Section 8.02(o), (p), (u), (v) or (aa) to the extent permitted
by any such Section;
(v) the Borrower and/or its Subsidiaries may enter into a joint
venture in China and in connection therewith may transfer assets (other
than accounts receivable
-69-
<PAGE>
and inventory that is not raw material inventory) to such joint venture,
provided, that (A) the aggregate fair market value of all assets of the
Borrower and its Domestic Subsidiaries so transferred (determined in good
faith by the Board of Directors or senior management of the Borrower) does
not exceed $1,000,000 and (B) the aggregate fair market value of all assets
of Foreign Subsidiaries so transferred (determined in good faith by the
Board of Directors or senior management of the Borrower) does not exceed
$1,000,000; and
(w) in addition to investments permitted by clauses (a) through (v)
above, so long as no Default or Event of Default then exists or would
result therefrom, the Borrower and its Subsidiaries may make additional
loans, advances and investments to or in a Person so long as the amount of
any such loan, advance or investment (at the time of the making thereof)
does not exceed an amount equal to the sum of (A) $1,500,000 (or, at any
time during a Reduced Leverage Period, $5,000,000) less the aggregate
amount of such $1,500,000 (or $5,000,000, as the case may be) previously
used to make loans, advances and investments pursuant to this clause (w) to
the extent same are then still outstanding (determined without regard to
any write-downs or write-offs thereof and net of cash repayments of
principal in the case of loans and cash equity returns (whether as a
dividend or redemption) in the case of equity investments), provided that
--------
the aggregate amount used to make loans, advances and investments pursuant
to this clause (w)(A), when added to the aggregate amount used to make
Permitted Acquisitions under Section 8.02(q)(vi)(x), shall not exceed
$6,500,000 (or, during a Reduced Leverage Period, $14,000,000) plus (B) an
amount equal to the Excess Earnings Amount at such time, provided that in
--------
no event shall the aggregate amount of loans, advances and investments made
in any fiscal year pursuant to this clause (w)(B) with the Excess Earnings
Amount exceed $2,000,000; provided, that (1) any loan, advance or
--------
investment made with the Excess Earnings Amount shall be in or to a Person
of which the Borrower owns (directly or indirectly) at least a majority
economic and voting interest (including the interest purchased or to be
purchased with the respective investment) and (2) neither the Borrower nor
any of its Subsidiaries may make or own any investment in Margin Stock.
8.06 Dividends, etc. Holdings will not, and will not permit any of
---------------
its Subsidiaries to, declare or pay any dividends (other than dividends payable
solely in common stock of Holdings or any such Subsidiary, as the case may be)
or return any capital to, its stockholders or authorize or make any other
distribution, payment or delivery of property or cash to its stockholders as
such, or redeem, retire, purchase or otherwise acquire, directly or indirectly,
for a consideration, any shares of any class of its capital stock, now or
hereafter outstanding (or any warrants for or options or stock appreciation
rights in respect of any of such shares), or set aside any funds for any of the
foregoing purposes, and Holdings will not permit any of its Subsidiaries to
purchase or otherwise acquire for consideration any shares of any class of the
capital stock of Holdings or any other Subsidiary, as the case may be, now or
hereafter outstanding (or any options or warrants or stock
appreciation rights issued by such Person with respect to its capital stock)
(all of the foregoing "Dividends"), except that:
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<PAGE>
(i) any Subsidiary of the Borrower may pay Dividends to the
Borrower or any Wholly-Owned Subsidiary of the Borrower;
(ii) (a) Holdings may redeem or purchase shares of Holdings Common
Stock or Holdings Class L Common Stock or options to purchase Holdings
Common Stock or Holdings Class L Common Stock, respectively, held by former
employees of Holdings or any of its Subsidiaries following the termination
of their employment, provided that (w) the only consideration paid by
--------
Holdings in respect of such redemptions and/or purchases shall be cash and
Shareholder Subordinated Notes, (x) the sum of (A) the aggregate amount
paid by Holdings in cash in respect of all such redemptions and/or
purchases plus (B) the aggregate amount of all principal and interest
payments made on Shareholder Subordinated Notes, shall not exceed
$1,000,000 in any fiscal year of Holdings, provided that such amount shall
--------
be increased by an amount equal to the proceeds received by Holdings after
the Effective Date from the sale or issuance of Holdings Common Stock or
Holdings Class L Common Stock, as the case may be, to management of
Holdings or any of its Subsidiaries and (y) at the time of any cash payment
permitted to be made pursuant to this Section 8.06(ii), no Default or Event
of Default shall then exist or result therefrom; and (b) so long as no
Default or Event of Default then exists or would result therefrom, the
Borrower may pay cash Dividends to Holdings so long as Holdings promptly
uses such proceeds for the purposes described in clause (ii)(a) of this
Section 8.06;
(iii) (a) Holdings may redeem or purchase shares of Holdings
Common Stock or Holdings Class L Common Stock or options to purchase
Holdings Common Stock or Holdings Class L Common Stock, as the case may be,
held by the two individuals holding the offices of Chairman and Chief
Financial Officer of the Borrower as of the Effective Date following the
death or disability of such individuals, provided that (x) the aggregate
amount paid by Holdings in respect of all such redemptions and/or purchases
for (I) the individual holding the office of Chairman shall not exceed
$5,000,000 and (II) the individual holding the office of Chief Financial
Officer does not exceed $1,000,000 and (y) at the time of any payment
permitted to be made pursuant to this Section 8.06(iii), no Default or
Event of Default shall then exist or result therefrom and (b) so long as no
Default or Event of Default then exists or would result therefrom, the
Borrower may pay cash Dividends to Holdings so long as the cash proceeds
thereof are promptly used by Holdings for the purposes described in clause
(iii)(a) of this Section 8.06;
(iv) the Borrower may pay cash Dividends to Holdings so long as
the proceeds thereof are promptly used by Holdings to (x) pay operating
expenses in the ordinary course of business (including, without limitation,
professional fees and expenses) and other similar corporate overhead costs
and expenses, provided that the aggregate amount of cash Dividends paid
--------
pursuant to this clause (x) shall not during any fiscal year of the
Borrower exceed $1,000,000 or (y) pay salaries or other compensation of
-71-
<PAGE>
employees who perform services for Holdings and the Borrower, provided that
--------
the aggregate amount of cash Dividends paid pursuant to this clause (y)
shall not during any fiscal year of the Borrower exceed $250,000;
(v) the Borrower may pay cash Dividends to Holdings in the amounts
and at the times of any payment by Holdings in respect of taxes, provided
--------
that (x) the amount of cash Dividends paid pursuant to this clause (v) to
enable Holdings to pay federal income taxes at any time shall not exceed
the lesser of (A) the amount of such federal income taxes owing by Holdings
at such time for the respective period and (B) the amount of such federal
income taxes that would be owing by the Borrower and its Subsidiaries on a
consolidated basis for such period if determined without regard to
Holdings' ownership of the Borrower and (y) any refunds shall promptly be
returned by Holdings to the Borrower; and
(vi) Holdings may pay regularly scheduled Dividends on the
Permitted Holdings PIK Securities (to the extent issued as preferred stock)
pursuant to the terms thereof solely through the issuance of additional
shares of such Permitted Holdings PIK Securities, provided that in lieu of
--------
issuing additional shares of such Permitted Holdings PIK Securities as
Dividends, Holdings may increase the liquidation preference of the shares
of Permitted Holdings PIK Securities in respect of which such Dividends
have accrued.
8.07 Transactions with Affiliates. Holdings will not, and will not
----------------------------
permit any of its Subsidiaries to, enter into any transaction or series of
transactions with any Affiliate other than in the ordinary course of business
and on terms and conditions substantially as favorable to Holdings or such
Subsidiary as would be obtainable by Holdings or such Subsidiary at the time in
a comparable arm's-length transaction with a Person other than an Affiliate;
provided, that the following shall in any event be permitted: (i) the
- --------
Transaction; (ii) the payment on the Initial Borrowing Date of one time
consulting fees to Bain Capital and/or any Related Party in an aggregate amount
(for Bain Capital and all such Related Parties taken together) not to exceed
$3,000,000 (plus reasonable out-of-pocket expenses incurred by Bain Capital and
all such Related Parties in providing services to the Borrower); (iii) the
payment, on a quarterly basis, of management fees to Bain Capital and/or Related
Parties in an aggregate amount (for all such Persons taken together) not to
exceed $500,000 in any fiscal quarter of the Borrower; (iv) Holdings and the
Borrower and its Domestic Subsidiaries may make any payments required under the
Holdings Tax Allocation Agreement; and (v) the payment by the Borrower, in
connection with any acquisition, divestiture or financing transaction that is
consummated, of a transaction fee to Bain Capital and/or the Bain Affiliates in
an aggregate amount (for all such Persons taken together) not to exceed 1% of
the aggregate value of any such transaction.
8.08 Capital Expenditures. (a) Holdings will not, and will not
--------------------
permit any of its Subsidiaries to, make any Capital Expenditures, except that,
(i) during the period commencing on the Initial Borrowing Date and ending
December 31, 1998, the Borrower and its Subsidiaries may make Capital
Expenditures in an aggregate amount not to exceed
-72-
<PAGE>
$23,000,000, provided that (x) for the period commencing on the Initial
--------
Borrowing Date and ending December 31, 1996, the aggregate amount of such
Capital Expenditures shall not exceed $9,000,000 and (y) for the fiscal year
ending December 31, 1997, the aggregate amount of such Capital Expenditures
shall not exceed $17,000,000 and (ii) during any fiscal year thereafter the
Borrower and its Subsidiaries may make Capital Expenditures so long as the
aggregate amount of such Capital Expenditures does not exceed $5,000,000.
(b) Notwithstanding the foregoing, in the event that the amount of
Capital Expenditures permitted to be made by the Borrower and its Subsidiaries
pursuant to clause (a) above in any period (before giving effect to any increase
in such permitted expenditure amount pursuant to this clause (b)) is greater
than the amount of such Capital Expenditures made by the Borrower and its
Subsidiaries during such period, such excess (the "Rollover Amount") may be
carried forward and utilized to make Capital Expenditures in succeeding fiscal
years, provided that in no event shall the aggregate amount of Capital
Expenditures made by the Borrower and its Subsidiaries during any fiscal year
pursuant to Section 8.08(a) and this Section 8.08(b) exceed 125% of the amount
permitted to be made in such fiscal year pursuant to Section 8.08(a).
(c) Notwithstanding the foregoing, the Borrower and its Subsidiaries
may make Capital Expenditures (which Capital Expenditures will not be included
in any determination under the foregoing clause (a)) with the proceeds of Asset
Sales to the extent such proceeds are not required to be applied to repay Term
Loans pursuant to Section 4.02(A)(c).
(d) Notwithstanding the foregoing, the Borrower and its Subsidiaries
may make Capital Expenditures (which Capital Expenditures will not be included
in any determination under the foregoing clause (a)) with the insurance proceeds
received by the Borrower or any of its Subsidiaries from any Recovery Event so
long as such Capital Expenditures are to replace or restore any properties or
assets in respect of which such proceeds were paid within 360 days following the
date of the receipt of such insurance proceeds to the extent such insurance
proceeds are not required to be applied to repay Term Loans pursuant to Section
4.02(A)(g).
(e) Notwithstanding the foregoing, the Borrower and its Subsidiaries
may make Capital Expenditures at any time in an aggregate amount equal to the
Excess Proceeds Amount at such time (which Capital Expenditures will not be
included in any determination under the foregoing clause (a)).
(f) Notwithstanding the foregoing, the Borrower and its Subsidiaries
may make Capital Expenditures at any time in an aggregate amount equal to the
Excess Earnings Amount at such time (which Capital Expenditures will not be
included in any determination under the foregoing clause (a)).
8.09 Minimum Consolidated EBITDA. The Borrower will not permit
---------------------------
Consolidated EBITDA for any Test Period ending on a date set forth below to be
less than the amount set forth opposite such date:
-73-
<PAGE>
<TABLE>
<CAPTION>
Minimum Consolidated
Date EBITDA
---- --------------------
<S> <C>
12/31/96 $3,800,000
3/31/97 $8,500,000
6/30/97 $15,300,000
9/30/97 $22,200,000
12/31/97 $26,900,000
3/31/98 $30,200,000
6/30/98 $32,000,000
9/30/98 $33,700,000
12/31/98 $34,600,000
3/31/99 $35,900,000
6/30/99 $37,500,000
9/30/99 $39,200,000
12/31/99 $41,200,000
3/31/00 $42,100,000
6/30/00 $43,000,000
9/30/00 $43,700,000
12/31/00 $44,200,000
3/31/01 $44,800,000
6/30/01 $45,300,000
9/30/01 $45,900,000
12/31/01 $46,500,000
3/31/02 $47,100,000
6/30/02 $47,700,000
9/30/02 $48,300,000
12/31/02 $48,900,000
3/31/03 $49,500,000
6/30/03 $50,200,000
9/30/03 $50,800,000
12/31/03 $51,500,000
3/31/04 $52,100,000
</TABLE>
8.10 Interest Coverage Ratio. The Borrower will not permit the
-----------------------
Interest Coverage Ratio for any Test Period ending on a date set forth below to
be less than the ratio set forth opposite such date:
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
12/31/96 1.35:1.00
3/31/97 1.45:1.00
6/30/97 1.75:1.00
9/30/97 1.90:1.00
</TABLE>
-74-
<PAGE>
<TABLE>
<S> <C>
12/31/97 2.25:1.00
3/31/98 2.60:1.00
6/30/98 2.80:1.00
9/30/98 3.05:1.00
12/31/98 3.20:1.00
3/31/99 3.50:1.00
6/30/99 3.85:1.00
9/30/99 4.30:1.00
All Test Periods thereafter 4.50:1.00
</TABLE>
8.11 Leverage Ratio. The Borrower will not permit the Leverage Ratio
--------------
at any time during a period set forth below to be more than the ratio set forth
opposite such period:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
12/31/97 - 3/30/98 5.10:1.00
3/31/98 - 6/29/98 4.50:1.00
6/30/98 - 9/29/98 4.10:1.00
9/30/98 - 12/30/98 3.75:1.00
12/31/98 - 3/30/99 3.45:1.00
3/31/99 - 6/29/99 3.25:1.00
6/30/99 - 9/29/99 2.95:1.00
9/30/99 - 12/30/99 2.60:1.00
12/31/99 - 3/30/00 2.30:1.00
3/31/00 - 6/29/00 2.15:1.00
Thereafter 2.00:1.00
</TABLE>
8.12 Limitation on Voluntary Payments and Modifications of
-----------------------------------------------------
Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain
- --------------------------------------------------------------------------------
Other Agreements; Issuance of Capital Stock; etc. Holdings will not, and will
- -----------------------------------------------------------------------------
not permit any of its Subsidiaries to:
- -------------------------------------
(i) make (or give any notice in respect of) any payment or
prepayment on or redemption or acquisition for value of any Seller
Subordinated Note or make any interest payment on any Seller Subordinated
Note, provided that, notwithstanding the foregoing, in connection with any
-------- ----
registered public offering of Holdings Common Stock, if as a result of such
public offering the Seller Subordinated Note is required to be repaid in
full in accordance with its terms, then Holdings may apply a portion of the
net proceeds received by it from such public offering to effect such
prepayment to the extent that such portion is not required to be applied to
repay Term Loans pursuant to Section 4.02(A)(d);
(ii) amend, modify or change, or permit the amendment or
modification of, any provision of the Seller Subordinated Note;
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<PAGE>
(iii) amend, modify or change in any way adverse to the interests
of the Banks, any Management Agreement, the terms of any Tax Allocation
Agreement, its Certificate of Incorporation (including, without limitation,
by the filing or modification of any certificate of designation) or By-
Laws, or any agreement entered into by it, with respect to its capital
stock (including any Shareholders' Agreement), or enter into any new
agreement with respect to its capital stock which would be adverse to the
interests of the Banks; or
(iv) issue any class of capital stock other than (x) in the case
of the Borrower and its Subsidiaries, non-redeemable common stock and (y)
in the case of Holdings, (1) the issuance of Holdings Common Stock or
Permitted Holdings PIK Securities as consideration for a Permitted
Acquisition pursuant to Section 8.02(q) and (2) issuances of Holdings
Common Stock or Holdings Class L Common Stock where, after giving effect to
such issuance, no Event of Default will exist under Section 9.10 and to the
extent the proceeds thereof are applied in accordance with Sections
4.02(A)(d) and 7.16.
8.13 Limitation on Certain Restrictions on Subsidiaries. Holdings
--------------------------------------------------
will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any such Subsidiary to (a) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by Holdings or any Subsidiary of
Holdings, or pay any Indebtedness owed to Holdings or a Subsidiary of Holdings,
(b) make loans or advances to Holdings or any of Holdings' Subsidiaries or (c)
transfer any of its properties or assets to Holdings or any of Holdings'
Subsidiaries, except for such encumbrances or restrictions existing under or by
reason of (i) applicable law, (ii) this Agreement and the other Credit
Documents, (iii) customary provisions restricting subletting or assignment of
any lease governing a leasehold interest of the Borrower or a Subsidiary of the
Borrower, (iv) customary provisions restricting assignment of any licensing
agreement entered into by the Borrower or a Subsidiary of the Borrower in the
ordinary course of business, (v) customary provisions restricting the transfer
of assets subject to Liens permitted under Sections 8.03(l) and (m) and (vi) any
document or instrument evidencing Foreign Subsidiary Working Capital
Indebtedness so long as such encumbrance or restriction only applies to the
Foreign Subsidiary incurring such Indebtedness.
8.14 Limitation on the Creation of Subsidiaries. Notwithstanding
------------------------------------------
anything to the contrary contained in this Agreement, Holdings will not, and
will not permit any of its Subsidiaries to, establish, create or acquire after
the Initial Borrowing Date any Subsidiary; provided that the Borrower and its
--------
Wholly-Owned Subsidiaries shall be permitted to establish or create (x)
Subsidiaries as a result of investments made pursuant to Section 8.05(q) and (y)
Wholly-Owned Subsidiaries so long as (i) at least 30 days' prior written notice
thereof (or such lesser notice as is acceptable to the Agent) is given to the
Agent, (ii) the capital stock of such new Subsidiary is pledged pursuant to, and
to the extent required by, this Agreement and the Pledge Agreement and the
certificates, if any, representing such stock, together with stock
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<PAGE>
powers duly executed in blank, are delivered to the Collateral Agent, (iii) such
new Subsidiary (other than a Foreign Subsidiary except to the extent otherwise
required pursuant to Section 7.15) executes a counterpart of the Subsidiary
Guaranty, the Pledge Agreement and the Security Agreement, and (iv) to the
extent requested by the Agent or the Required Banks, takes all actions required
pursuant to Section 7.11. In addition, each new Wholly-Owned Subsidiary that is
required to execute any Credit Document shall execute and deliver, or cause to
be executed and delivered, all other relevant documentation of the type
described in Section 5 as such new Subsidiary would have had to deliver if such
new Subsidiary were a Credit Party on the Initial Borrowing Date.
8.15 Seller Subordinated Note. Holdings shall not effect any
------------------------
secondary public sale of Holdings Common Stock which would cause the triggering
of any mandatory repayment provision in any outstanding Seller Subordinated Note
pursuant to the terms thereof unless such secondary public sale is made in
conjunction with a public issuance of Holdings Common Stock which generates net
proceeds to Holdings of an amount which, when reduced by the amount of such net
proceeds required to be applied to repay the Term Loans pursuant to Section
4.02(A)(d), is sufficient to enable Holdings to repay the Seller Subordinated
Note (together with all accrued interest thereon) in full. In addition,
Holdings will not make any interest payments on the Seller Subordinated Note
except upon repayment of the Seller Subordinated Note in accordance with the
terms hereof.
SECTION 9. Events of Default. Upon the occurrence of any of the
-----------------
following specified events (each, an "Event of Default"):
9.01 Payments. The Borrower shall (i) default in the payment when
--------
due of any principal of the Loans or (ii) default, and such default shall
continue for three or more days, in the payment when due of any Unpaid Drawing,
any interest on the Loans or any Fees or any other amounts owing hereunder or
under any other Credit Document; or
9.02 Representations, etc. Any representation, warranty or statement
---------------------
made by Holdings, the Borrower or any other Credit Party herein or in any other
Credit Document or in any statement or certificate delivered pursuant hereto or
thereto shall prove to be untrue in any material respect on the date as of which
made or deemed made; or
9.03 Covenants. Any Credit Party shall (a) default in the due
---------
performance or observance by it of any term, covenant or agreement contained in
Sections 7.11, 7.14, 7.16 or 8, or (b) default in the due performance or
observance by it of any term, covenant or agreement (other than those referred
to in Section 9.01, 9.02 or clause (a) of this Section 9.03) contained in this
Agreement and such default shall continue unremedied for a period of at least 30
days after notice to the defaulting party by the Agent or the Required Banks; or
9.04 Default Under Other Agreements. (a) Holdings or any of its
------------------------------
Subsidiaries shall (i) default in any payment with respect to any Indebtedness
(other than the Obligations) beyond the period of grace, if any, provided in the
instrument or agreement under which
-77-
<PAGE>
Indebtedness was created or (ii) default in the observance or performance of any
agreement or condition relating to any such Indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause any such Indebtedness to become due prior to its stated maturity; or (b)
any Indebtedness (other than the Obligations) of Holdings or any of its
Subsidiaries shall be declared to be due and payable, or shall be required to be
prepaid other than by a regularly scheduled required prepayment or as a
mandatory prepayment (unless such required prepayment or mandatory prepayment
results from a default thereunder or an event of the type that constitutes an
Event of Default), prior to the stated maturity thereof; provided, that it shall
--------
not constitute an Event of Default pursuant to clause (a) or (b) of this Section
9.04 unless the principal amount of any one issue of such Indebtedness, or the
aggregate amount of all such Indebtedness referred to in clauses (a) and (b)
above, exceeds $2,500,000 at any one time; or
9.05 Bankruptcy, etc. Holdings or any of its Subsidiaries shall
----------------
commence a voluntary case concerning itself under Title 11 of the United States
Code entitled "Bankruptcy," as now or hereafter in effect, or any successor
thereto (the "Bankruptcy Code"); or an involuntary case is commenced against
Holdings or any of its Subsidiaries and the petition is not controverted within
10 days, or is not dismissed within 60 days, after commencement of the case; or
a custodian (as defined in the Bankruptcy Code) is appointed for, or takes
charge of, all or substantially all of the property of Holdings or any of its
Subsidiaries; or Holdings or any of its Subsidiaries commences any other
proceeding under any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to Holdings or any of
its Subsidiaries; or there is commenced against Holdings or any of its
Subsidiaries any such proceeding which remains undismissed for a period of 60
days; or Holdings or any of its Subsidiaries is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or Holdings or any of its Subsidiaries suffers any
appointment of any custodian or the like for it or any substantial part of its
property to continue undischarged or unstayed for a period of 60 days; or
Holdings or any of its Subsidiaries makes a general assignment for the benefit
of creditors; or any corporate action is taken by Holdings or any of its
Subsidiaries for the purpose of effecting any of the foregoing; or
9.06 ERISA. (a) Any Plan shall fail to satisfy the minimum funding
-----
standard required for any plan year or part thereof or a waiver of such standard
or extension of any amortization period is sought or granted under Section 412
of the Code, any Plan shall have had or is likely to have a trustee appointed to
administer such Plan, any Plan is, shall have been or is likely to be terminated
or the subject of termination proceedings under ERISA, any Plan shall have an
Unfunded Current Liability, a contribution required to be made to a Plan or a
Foreign Pension Plan has not been timely made, Holdings or any Subsidiary of
Holdings or any ERISA Affiliate has incurred or is likely to incur a liability
to or on account of a Plan under Section 409, 502(i), 502(l), 515, 4062, 4063,
4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971, 4975 or
4980 of the Code, or Holdings or any Subsidiary of Holdings has
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incurred or is likely to incur liabilities pursuant to one or more employee
welfare benefit plans (as defined in Section 3(1) of ERISA) which provide
benefits to retired employees or other former employees (other than as required
by Section 601 of ERISA) or employee pension benefit plans (as defined in
Section 3(2) of ERISA) or Foreign Pension Plans; (b) there shall result from any
such event or events the imposition of a lien, the granting of a security
interest, or a liability or a material risk of incurring a liability; and (c)
which lien, security interest or liability which arises from such event or
events, in the opinion of the Required Banks, will have a Material Adverse
Effect; or
9.07 Security Documents. (a) Except in each case to the extent
------------------
resulting from the failure of the Collateral Agent to retain possession of the
applicable Pledged Securities, any Security Document shall cease to be in full
force and effect, or shall cease to give the Collateral Agent the Liens, rights,
powers and privileges purported to be created thereby in favor of the Collateral
Agent, or (b) any Credit Party shall default in the due performance or
observance of any term, covenant or agreement on its part to be performed or
observed pursuant to any such Security Document and such default shall continue
beyond any cure or grace period specifically applicable thereto pursuant to the
terms of such Security Document; or
9.08 Guaranties. The Guaranties or any provision thereof shall cease
----------
to be in full force and effect, or any Guarantor or any Person acting by or on
behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations
under any Guaranty or any Guarantor shall default in the due performance or
observance of any material term, covenant or agreement on its part to be
performed or observed pursuant to any Guaranty; or
9.09 Judgments. One or more judgments or decrees shall be entered
---------
against Holdings or any of its Subsidiaries involving a liability (not paid or
not fully covered by insurance) in excess of $2,500,000 for all such judgments
and decrees and all such judgments or decrees shall not have been vacated,
discharged or stayed or bonded pending appeal within 60 days from the entry
thereof; or
9.10 Ownership. A Change of Control Event shall have occurred;
---------
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Agent shall, upon the written request of the
Required Banks, by written notice to the Borrower, take any or all of the
following actions, without prejudice to the rights of the Agent or any Bank to
enforce its claims against any Guarantor or the Borrower, except as otherwise
specifically provided for in this Agreement (provided, that if an Event of
--------
Default specified in Section 9.05 shall occur with respect to the Borrower, the
result which would occur upon the giving of written notice by the Agent as
specified in clauses (i) and (ii) below shall occur automatically without the
giving of any such notice): (i) declare the Total Commitment (or the unutilized
portion thereof) terminated, whereupon the Commitment of each Bank (or the
unutilized portion thereof) shall forthwith terminate immediately and any
Commitment Fees shall forthwith become due and payable without any other notice
of any kind; (ii) declare the principal of and any accrued interest in respect
of all Loans and all Obligations owing
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hereunder (including Unpaid Drawings) to be, whereupon the same shall become,
forthwith due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Borrower; (iii) enforce, as
Collateral Agent (or direct the Collateral Agent to enforce), any or all of the
Liens and security interests created pursuant to the Security Documents; (iv)
terminate any Letter of Credit which may be terminated in accordance with its
terms; and (v) direct the Borrower to pay (and the Borrower hereby agrees upon
receipt of such notice, or upon the occurrence of any Event of Default specified
in Section 9.05, to pay) to the Collateral Agent at the Payment Office such
additional amounts of cash, to be held as security for the Borrower's
reimbursement obligations in respect of Letters of Credit then outstanding,
equal to the aggregate Stated Amount of all Letters of Credit then outstanding.
SECTION 10. Definitions. As used herein, the following terms shall
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have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural the singular:
"A Term Loan" shall have the meaning provided in Section 1.01(A)(a).
"A Term Loan Commitment" shall mean, with respect to each Bank, the
amount set forth opposite such Bank's name in Annex I directly below the column
entitled "A Term Loan Commitment," as the same may be reduced or terminated
pursuant to Section 3.03 and/or 9 or otherwise modified pursuant to Section 1.13
and/or 12.04(b).
"A Term Loan Facility" shall mean the Facility evidenced by the Total
A Term Loan Commitment.
"A Term Loan Maturity Date" shall mean February 28, 2002.
"A Term Note" shall have the meaning provided in Section 1.05(a).
"A TL Percentage" shall mean, at any time, a fraction (expressed as a
percentage) the numerator of which is equal to the aggregate principal amount of
all A Term Loans outstanding at such time and the denominator of which is equal
to the aggregate principal amount of all Term Loans outstanding at such time.
"Acquired Business" shall mean the assets and Acquired Subsidiaries
acquired by the Borrower pursuant to the Acquisition Documents.
"Acquired Entity or Business" shall have the meaning set forth in the
definition of "Consolidated Net Income."
"Acquired Subsidiaries" shall mean those Subsidiaries listed on Annex
IX hereto.
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"Acquisition" shall mean the acquisition by the Borrower for cash and
the Seller Subordinated Note of substantially all of the assets of the Acquired
Subsidiaries and all of the issued and outstanding shares of capital stock of
the Acquired Subsidiaries of the Seller and substantially all the assets of
Pilkington Deutschland GmbH, a company registered under the laws of Germany
pursuant to, and in accordance with the terms of, the Acquisition Documents.
"Acquisition Agreements" shall mean (i) the Agreement for Purchase and
Sale, dated July 5, 1996, by and between the Borrower and the Seller, as in
effect on the Initial Borrowing Date, between the Borrower and the Seller, as
amended, modified or supplemented from time to time in accordance with the terms
thereof and hereof and (ii) each of the agreements listed on Annex XV hereto.
"Acquisition Documents" shall mean the Acquisition Agreements, and all
other purchase and other agreements, instruments and documents relating to the
Acquisition.
"Additional Security Documents" shall have the meaning provided in
Section 7.11.
"Adjusted Certificate of Deposit Rate" shall mean, on any day, the sum
(rounded to the nearest 1/100 of 1%) of (1) the rate obtained by dividing (x)
the most recent weekly average dealer offering rate for negotiable certificates
of deposit with a three-month maturity in the secondary market as published in
the most recent Federal Reserve System publication entitled "Select Interest
Rates," published weekly on Form H.15 as of the date hereof, or if such
publication or a substitute containing the foregoing rate information shall not
be published by the Federal Reserve System for any week, the weekly average
offering rate determined by the Agent on the basis of quotations for such
certificates received by it from three certificate of deposit dealers in New
York of recognized standing or, if such quotations are unavailable, then on the
basis of other sources reasonably selected by the Agent, by (y) a percentage
equal to 100% minus the stated maximum rate of all reserve requirements as
specified in Regulation D applicable on such day to a three-month certificate of
deposit of a member bank of the Federal Reserve System in excess of $100,000
(including, without limitation, any marginal, emergency, supplemental, special
or other reserves), plus (2) the then daily net annual assessment rate as
estimated by the Agent for determining the current annual assessment payable by
BTCo to the Federal Deposit Insurance Corporation for insuring three month
certificates of deposit.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all directors
and officers of such Person), controlled by, or under direct or indirect common
control with such Person. A Person shall be deemed to control a corporation if
such Person possesses, directly or indirectly, the power (i) to vote 5% or more
of the securities having ordinary voting power for the election of directors of
such corporation or (ii) to direct or cause the direction of the management and
policies of such corporation, whether through the ownership of voting
securities, by contract or otherwise.
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"Agent" shall have the meaning provided in the first paragraph of this
Agreement and shall include any successor to the Agent appointed pursuant to
Section 11.10.
"Aggregate Unutilized Commitment" with respect to any Bank at any time
shall mean the sum of (i) such Bank's A Term Loan Commitment at such time, if
any, (ii) such Bank's B Term Loan Commitment at such time, if any, and (iii)
such Bank's Revolving Loan Commitment at such time less the sum of (x) the
----
aggregate outstanding principal amount of all Revolving Loans made by such Bank
and (y) such Bank's RL Percentage of the Letter of Credit Outstandings at such
time.
"Agreement" shall mean this Credit Agreement, as the same may be from
time to time modified, amended and/or supplemented.
"Applicable Base Rate Margin" shall mean (i) in the case of A Term
Loans and Revolving Loans, 1.75%, less the then applicable Interest Reduction
Discount, if any, and (ii) in the case of B Term Loans, 2.25%.
"Applicable Commitment Fee Percentage" shall mean 1/2 of 1%.
"Applicable Equity/ECF Percentage" shall mean initially, 75%,
provided, that during any Applicable Period, the Applicable Equity/ECF
- --------
Percentage shall be 50% if, but only if, as of the Test Date with respect to
such Applicable Period the Leverage Ratio is less than or equal to 3.00:1.0.
"Applicable Eurodollar Margin" shall mean (i) in the case of A Term
Loans and Revolving Loans, 2.75%, less the then applicable Interest Reduction
Discount, if any and (ii) in the case of B Term Loans, 3.25%.
"Applicable Period" shall mean each period which shall commence on a
date on which the financial statements are delivered pursuant to Section 7.01(b)
or (c), as the case may be, and which shall end on the earlier of (i) the date
of actual delivery of the next financial statements pursuant to Section 7.01(b)
or (c), as the case may be, and (ii) the latest date on which the next financial
statements are required to be delivered pursuant to Section 7.01(b) or (c), as
the case may be; provided that for purposes of the definition of Interest
--------
Reduction Discount, no Applicable Period shall commence on a date occurring
prior to the date of delivery of financial statements pursuant to Section
7.01(b) in respect of the fiscal quarter ending June 30, 1997.
"Asset Sale" shall mean any sale, transfer or other disposition by
Holdings or any of its Subsidiaries to any Person other than the Borrower or any
Wholly-Owned Subsidiary of the Borrower of any asset (including, without
limitation, any capital stock or other securities of another Person) of Holdings
or such Subsidiary other than (i) sales, transfers or other dispositions of
inventory made in the ordinary course of business and (ii) sales of assets
pursuant to Section 8.02(e), (f), (g), (p), (u), (w), (x) or (z), provided, that
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the sale of the
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Natural Touch trademark and the one-time sale of inventory related thereto
pursuant to Section 8.02 shall be considered an Asset Sale.
"Assignment and Assumption Agreement" shall mean the Assignment and
Assumption Agreement substantially in the form of Exhibit J (appropriately
completed).
"Authorized Officer" shall mean the Chief Executive Officer,
President, Chief Financial Officer, Treasurer, Controller or Secretary or any
other senior officer of Holdings or the Borrower designated as such in writing
to the Agent by Holdings or the Borrower, in each case to the extent reasonably
acceptable to the Agent.
"B Banks" shall have the meaning provided in Section 4.02(C).
"B Term Loan" shall have the meaning provided in Section 1.01(A)(b).
"B Term Loan Commitment" shall mean, with respect to each Bank, the
amount set forth opposite such Bank's name in Annex I directly below the column
entitled "B Term Loan Commitment," as the same may be terminated pursuant to
Section 3.03 and/or 9 or otherwise modified pursuant to Section 1.13 and/or
12.04(b).
"B Term Loan Facility" shall mean the Facility evidenced by the Total
B Term Loan Commitment.
"B Term Loan Maturity Date" shall mean February 29,2004.
"B Term Note" shall have the meaning provided in Section 1.05(a).
"B TL Percentage" shall mean, at any time, a fraction (expressed as a
percentage) the numerator of which is equal to the aggregate principal amount of
all B Term Loans outstanding at such time and the denominator of which is equal
to the aggregate principal amount of all Term Loans outstanding at such time.
"Bain Capital" shall mean Bain Capital, Inc. a Delaware corporation.
"Bank" shall have the meaning provided in the first paragraph of this
Agreement.
"Bank Default" shall mean (i) the refusal (which has not been
retracted) of an RL Bank to make available its portion of any Borrowing or to
fund its portion of any unreimbursed payment under Section 2.04(c) or (ii) an RL
Bank having notified the Agent and/or the Borrower that it does not intend to
comply with the obligations under Section 1.01(A)(c), 1.01(C) or 2.04(c), in the
case of either clause (i) or (ii) above as a result of the appointment of a
receiver or conservator with respect to such Bank at the direction or request of
any regulatory agency or authority.
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"Bankruptcy Code" shall have the meaning provided in Section 9.05.
"Base Rate" at any time shall mean the higher of (x) the rate which is
1/2 of 1% in excess of the Adjusted Certificate of Deposit Rate and (y) the
Prime Lending Rate.
"Base Rate Loan" shall mean each Loan bearing interest at the rates
provided in Section 1.08(a).
"Borrower" shall have the meaning provided in the first paragraph of
this Agreement.
"Borrower Subordinated Loans" shall have the meaning provided in
Section 8.05(s).
"Borrower Subordinated Note" shall mean an unsecured junior
subordinated note issued by the Borrower (and not guaranteed or supported in any
way by any Subsidiary of the Borrower) in the form of Exhibit M, as amended,
modified or supplemented from time to time in accordance with the terms hereof
and thereof.
"Borrowing" shall mean the incurrence of one Type of Loan pursuant to
a single Facility by the Borrower from all of the Banks having Commitments with
respect to such Facility on a pro rata basis on a given date (or resulting from
--- ----
conversions on a given date), having in the case of Eurodollar Loans the same
Interest Period; provided, that Base Rate Loans incurred pursuant to Section
--------
1.10(b) shall be considered part of any related Borrowing of Eurodollar Loans.
"BTCo" shall mean Bankers Trust Company, in its individual capacity,
and any successor corporation thereto by merger, consolidation or otherwise.
"Business Day" shall mean (i) for all purposes other than as covered
by clause (ii) below, any day excluding Saturday, Sunday and any day which shall
be in the City of New York a legal holiday or a day on which banking
institutions are authorized by law or other governmental actions to close and
(ii) with respect to all notices and determinations in connection with, and
payments of principal and interest on, Eurodollar Loans, any day which is a
Business Day described in clause (i) and which is also a day for trading by and
between banks in U.S. dollar deposits in the interbank Eurodollar market.
"Capital Expenditures" shall mean, with respect to any Person, without
duplication, all expenditures by such Person which should be capitalized in
accordance with GAAP, including, without duplication, all such expenditures with
respect to fixed or capital assets (including, without limitation, expenditures
for maintenance and repairs which should be capitalized in accordance with
GAAP), and the amount of all Capitalized Lease Obligations incurred by such
Person.
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"Capital Lease," as applied to any Person, shall mean any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"Capitalized Lease Obligations" shall mean all obligations under
Capital Leases of the Borrower or any of its Subsidiaries in each case taken at
the amount thereof accounted for as liabilities in accordance with GAAP.
"Cash Equivalents" shall mean (i) securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided, that the full faith and credit of the United
--------
States of America is pledged in support thereof) having maturities of not more
than twelve months from the date of acquisition, (ii) U.S. dollar denominated
time deposits, certificates of deposit and bankers acceptances of (x) any Bank
or (y) any bank whose short-term commercial paper rating from Standard & Poor's
Corporation ("S&P") is at least A-1 or the equivalent thereof or from Moody's
Investors Service, Inc. ("Moody's") is at least P-1 or the equivalent thereof
(any such bank or Bank, an "Approved Bank"), in each case with maturities of not
more than twelve months from the date of acquisition, (iii) commercial paper
issued by any Approved Bank or by the parent company of any Approved Bank and
commercial paper issued by, or guaranteed by, any industrial or financial
company with a short-term commercial paper rating of at least A-1 or the
equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's,
or guaranteed by any industrial company with a long term unsecured debt rating
of at least A or A2, or the equivalent of each thereof, from S&P or Moody's, as
the case may be, and in each case maturing within twelve months after the date
of acquisition, (iv) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state or any
public instrumentality thereof maturing within twelve months from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either S&P or Moody's and (v) investments in
money market funds substantially all the assets of which are comprised of
securities of the types described in clauses (i) through (iv) above.
"Change of Control Event" shall mean (a) Holdings shall cease to own
directly 100% on a fully diluted basis of the economic and voting interest in
the Borrower's capital stock or (b) Bain Capital and/or its Related Parties
shall cease to own on a fully diluted basis in the aggregate at least 51% of the
economic and voting interest in Holdings' capital stock.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated and rulings issued thereunder.
Section references to the Code are to the Code, as in effect at the date of this
Agreement and any subsequent provisions of the Code amendatory thereof,
supplemental thereto or substituted therefor.
"Collateral" shall mean all of the Collateral as defined in each of
the Security Documents.
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"Collateral Agent" shall mean the Agent acting as collateral agent for
the Secured Creditors.
"Collective Bargaining Agreements" shall have the meaning provided in
Section 5.13(b).
"Commitment" shall mean, with respect to each Bank, such Bank's A Term
Loan Commitment, B Term Loan Commitment and Revolving Loan Commitment.
"Commitment Fee" shall have the meaning provided in Section 3.01(a).
"Consolidated Current Assets" shall mean, at any time, the current
assets (other than cash, Cash Equivalents and deferred income taxes to the
extent included in current assets) of the Borrower and its Subsidiaries at such
time determined on a consolidated basis.
"Consolidated Current Liabilities" shall mean, at any time, the
current liabilities of the Borrower and its Subsidiaries determined on a
consolidated basis, but excluding (i) deferred income taxes, (ii) the current
portion of and accrued but unpaid interest on any Indebtedness under this
Agreement and any other long-term Indebtedness which would otherwise be included
therein, (iii) short-term borrowings of Foreign Subsidiaries unless the proceeds
thereof are used to finance current assets of such Foreign Subsidiaries and (iv)
to the extent deducted in determining Consolidated Net Income, reserves for
incentive employee bonuses, litigation reserves and delinquent and/or disputed
accounts payable.
"Consolidated Debt" shall mean, at any time, all Indebtedness of the
Borrower and its Subsidiaries determined on a consolidated basis, provided that
--------
for purposes of this definition, the amount of Indebtedness in respect of
Interest Rate Protection Agreements shall be at any time the unrealized net loss
portion, if any, of the Borrower and/or its Subsidiaries thereunder on a marked-
to-market basis determined no more than one month prior to such time.
"Consolidated EBIT" shall mean, for any period, Consolidated Net
Income, before (i) total interest expense (inclusive of amortization of deferred
financing fees, premiums on Interest Rate Protection Agreements and any other
original issue discount) of the Borrower and its Subsidiaries determined on a
consolidated basis, (ii) the write-off of inventory step-up and in-process
research and development costs in accordance with purchase accounting, (iii) any
non-cash charges deducted in determining Consolidated Net Income for such period
and related to the issuance by Holdings of stock, warrants or options to
management (or any exercise of any such warrants or options), (iv) provisions
for taxes based on income and foreign withholding taxes, (v) giving effect to
any extraordinary gains or losses but with giving effect to gains or losses from
sales of assets sold in the ordinary course of business, (vi) any non-cash
charges related to the write-up of samples in accordance with purchase
accounting and (vii) Restructuring Expenditures to the extent deducted in
determining Consolidated Net Income for such period, provided that the aggregate
--------
amount of Restructuring Expenditures added back pursuant to this clause (vii)
for all periods shall not exceed $24,500,000.
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"Consolidated EBITDA" shall mean, for any period, Consolidated EBIT,
adjusted by adding thereto the amount of all depreciation expense and
amortization expense that were deducted in determining Consolidated EBIT for
such period.
"Consolidated Interest Expense" shall mean, for any period, total
interest expense (including that attributable to Capital Leases in accordance
with GAAP) of the Borrower and its Subsidiaries determined on a consolidated
basis with respect to all outstanding Indebtedness of the Borrower and its
Subsidiaries, including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs or benefits under Interest Rate Protection
Agreements, but excluding, however, amortization of any payments made to obtain
any Interest Rate Protection Agreements and deferred financing costs and any
interest expense on deferred compensation arrangements to the extent included in
total interest expense.
"Consolidated Net Income" shall mean, for any period, the net income
(or loss), after provision for taxes, of the Borrower and its Subsidiaries on a
consolidated basis for such period taken as a single accounting period but
excluding any unrealized losses and gains for such period resulting from mark-
to-market of Other Hedging Agreements; provided that (x) for purposes of Section
--------
8.11 and the definitions of Applicable Commitment Fee Percentage, Applicable
Equity/ECF Percentage, Interest Reduction Discount and Reduced Leverage Period
there shall be included (to the extent not already included) in determining
Consolidated Net Income for any period the net income (or loss) of any Person,
business, property or asset acquired during such period pursuant to Section
8.02(q) and not subsequently sold or otherwise disposed of by the Borrower or
one of its Subsidiaries during such period (each such Person, business, property
or asset acquired and not subsequently disposed of during such period, an
"Acquired Entity or Business"), in each case based on the actual net income (or
loss) of such Acquired Entity or Business for the entire period (including the
portion thereof occurring prior to such acquisition) and (y) for purposes of
calculating Consolidated Net Income for any period, Consolidated Net Income
shall be adjusted for factually supportable and identifiable cost savings for
such period determined in accordance with GAAP and concurred in by the
Borrower's independent accountants that are directly attributable to the
acquisition of an Acquired Entity or Business pursuant to a Permitted
Acquisition.
"Contingent Obligations" shall mean as to any Person any obligation of
such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(a) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (b) to advance or supply funds (x) for the
purchase or payment of any such primary obligation or (y) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (c) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (d) otherwise to assure or hold harmless the owner of
such
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primary obligation against loss in respect thereof; provided, however, that the
-------- -------
term Contingent Obligation shall not include endorsements of instruments for
deposit or collection or standard contractual indemnities entered into, in each
case in the ordinary course of business. The amount of any Contingent Obligation
shall be deemed to be an amount equal to the stated or determinable amount of
the primary obligation in respect of which such Contingent Obligation is made
or, if not stated or determinable, the maximum reasonably anticipated liability
in respect thereof (assuming such Person is required to perform thereunder) as
determined by such Person in good faith.
"Credit Documents" shall mean this Agreement, the Notes, the
Guaranties and each Security Document.
"Credit Event" shall mean the making of a Loan (other than a Revolving
Loan made pursuant to a Mandatory Borrowing) or the issuance of a Letter of
Credit.
"Credit Party" shall mean Holdings, the Borrower and each Subsidiary
Guarantor.
"Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"Defaulting Bank" shall mean any Bank with respect to which a Bank
Default is in effect.
"Designated Real Property Sale" shall mean a sale by the Borrower
and/or any of its Subsidiaries of the Real Property owned by them as of the
Initial Borrowing Date and located in San Diego, California.
"Dividends" shall have the meaning provided in Section 8.06.
"Documents" shall mean the Credit Documents, the Acquisition
Documents, the Seller Subordinated Note and the Refinancing Documents.
"Domestic Subsidiary" shall mean each Subsidiary of the Borrower
which is not a Foreign Subsidiary.
"Effective Date" shall have the meaning provided in Section 12.10.
"Eligible Transferee" shall mean and include a commercial bank,
investment company, financial institution or other "accredited investor" (as
defined in Regulation D of the Securities Act).
"Employment Agreements" shall have the meaning provided in
Section 5.13(f).
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"End Date" shall mean the last day of any Applicable Period.
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of non-compliance or violation, investigations or proceedings relating
in any way to any violation (or alleged violation) by Holdings or any of its
Subsidiaries under any Environmental Law (hereafter "Claims") or any permit
issued under any such law, including, without limitation, (a) any and all Claims
by governmental or regulatory authorities for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any applicable
Environmental Law, and (b) any and all Claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.
"Environmental Law" shall mean any federal, state or local statute,
law, rule, regulation, ordinance, code, policy or rule of common law now or
hereafter in effect and in each case as amended, and any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent, decree or judgment (for purposes of this definition
(collectively, "Laws")), relating to the environment or Hazardous Materials or
health and safety to the extent health and safety issues arise under the
Occupational Safety and Health Act of 1970, as amended, or any such similar
Laws.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and the
rulings issued thereunder. Section references to ERISA are to ERISA as in
effect at the date of this Agreement and any subsequent provisions of ERISA
amendatory thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section 3(9)
of ERISA) which together with Holdings or any Subsidiary of Holdings would be
deemed to be a "single employer" within the meaning of Section 414(b), (c), (m)
or (o) of the Code.
"Eurodollar Loans" shall mean each Loan bearing interest at the rates
provided in Section 1.08(b).
"Eurodollar Rate" shall mean, with respect to each Interest Period for
a Eurodollar Loan, (i) the arithmetic average (rounded to the nearest 1/100 of
1%) of the offered quotation to first-class banks in the interbank Eurodollar
market by the Agent for U.S. dollar deposits of amounts in same day funds
comparable to the outstanding principal amount of the Eurodollar Loan of the
Agent for which an interest rate is then being determined with maturities
comparable to the Interest Period to be applicable to such Eurodollar Loan,
determined as of 10:00 A.M. (New York time) on the date which is two Business
Days prior to the commencement of such Interest Period divided (and rounded
upward to the next whole multiple of 1/16 of 1%) by (ii) a percentage equal to
100% minus the then stated maximum rate of all reserve requirements (including,
without limitation, any marginal, emergency, supplemental,
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special or other reserves) applicable to any member bank of the Federal Reserve
System in respect of Eurocurrency liabilities as defined in Regulation D (or any
successor category of liabilities under Regulation D).
"Event of Default" shall have the meaning provided in Section 9.
"Excess Cash Flow" shall mean, for any period, (i) the sum of (A)
Consolidated Net Income for such period, plus (B) without duplication, the
----
amount of all non-cash charges (including, without limitation or duplication,
depreciation, amortization and non-cash interest expense but excluding any non-
cash charges deducted in determining Consolidated Current Liabilities) included
in determining Consolidated Net Income for such period, plus (C) the decrease,
----
if any, in Working Capital from the first day to the last day of such period,
plus (D) any cash reimbursement from the Seller required pursuant to the
- ----
Acquisition Agreements for purchase price adjustments (other than reimbursements
or payments used or to be used within twelve months following the Initial
Borrowing Date to effect the European restructuring), minus (ii) the sum of (A)
-----
any non-cash credits (including from sales of assets but excluding reserves
excluded from Consolidated Current Liabilities (as described in item (iv) of the
definition thereof) in a previous period to the extent such reserves are
reversed in the current period) included in determining Consolidated Net Income
for such period, (B) gains from sales of assets (other than sales of inventory
in the ordinary course of business) included in determining Consolidated Net
Income for such period, (C) an amount equal to (1) all Capital Expenditures
(excluding Capital Expenditures made pursuant to Section 8.08(c) and (d)) made
during such period that are not financed by Indebtedness (including Capitalized
Lease Obligations but excluding Loans hereunder) plus (or minus, if negative)
(2) the Rollover Amount for such period to be carried forward to the next period
less the Rollover Amount (if any) for the preceding period carried forward to
the current period, (D) the aggregate principal amount of permanent principal
payments of Indebtedness for borrowed money of the Borrower and its Subsidiaries
(other than repayments of Loans, provided that repayments of Loans shall be
deducted in determining Excess Cash Flow if such repayments were (x) required as
a result of a Scheduled A Repayment or a Scheduled B Repayment under Section
4.02(A)(b) or (y) made as a voluntary prepayment with internally generated funds
(but in the case of a voluntary prepayment of Revolving Loans, only to the
extent accompanied by a voluntary reduction to the Total Revolving Loan
Commitment)) during such period, (E) non-cash charges added back in a previous
period pursuant to clause (i)(B) above to the extent any such charge has become
a cash item in the current period, (F) the increase, if any, in Working Capital
from the first day to the last day of such period, (G) costs incurred by
Holdings during such period and paid for with the proceeds of dividends paid by
the Borrower pursuant to Section 8.06(iv), to the extent not deducted in
determining Consolidated Net Income for such period, (H) any cash payment to the
Seller required pursuant to the Acquisition Agreements for purchase price
adjustments, (I) any cash Restructuring Expenditures incurred during such period
to the extent not deducted in determining Consolidated Net Income for such
period, (J) any Restructuring Reserves as at the end of such period and (K) any
cash disbursements made during such period against non-current liabilities (such
as transition reserves and deferred taxes) to the extent not deducted in
determining Consolidated Net Income.
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"Excess Cash Flow Period" shall mean (i) the period from and including
the day following the Initial Borrowing Date to and including December 31, 1997
and (ii) with respect to each fiscal year thereafter, such fiscal year.
"Excess Cash Payment Date" shall mean the date occurring 90 days after
the last day of a fiscal year of the Borrower (beginning with its fiscal year
ending on December 31, 1997).
"Excess Earnings Amount" shall initially be zero, which amount shall
be (A) increased on the 90th day following each fiscal year of the Borrower
---------
(commencing with the fiscal year ending December 31, 1997), by an amount equal
to (i) the amount, if any, by which Consolidated EBITDA for the immediately
preceding fiscal year exceeds the projected Consolidated EBITDA set forth on
Annex XII for such immediately preceding fiscal year multiplied by (ii) 0.25,
and (B) reduced (i) at the time any Capital Expenditure is made pursuant to
-------
Section 8.08(f), by the amount of such Capital Expenditure and (ii) at the time
any investment is made pursuant to Section 8.05(w), by the amount (if any) of
clause (B) thereof used to make such investment (it being understood that for
this purpose the Borrower shall be deemed to have used the clause (A) amount of
Section 8.05(w) to the maximum extent available before any of the clause (B)
amount shall be deemed to have been used).
"Excess Proceeds" shall mean (i) the portion of the net proceeds
received by Holdings after the Effective Date from any registered public
offering of Holdings Common Stock and/or from the issuance of Holdings common
stock pursuant to a Permitted Strategic Equity Issuance, in each case which is
permitted to be retained by Holdings pursuant to Section 4.02(A)(d), to the
extent contributed to the Borrower in accordance with Section 7.16, (ii) the
portion of Excess Cash Flow of the Borrower and its Subsidiaries which is
permitted to be retained by the Borrower pursuant to Section 4.02(A)(f) and
(iii) 100% of the Permitted Equity Proceeds received by Holdings from time to
time, to the extent contributed or loaned to the Borrower in accordance with
Section 4.02(A)(d).
"Excess Proceeds Amount" shall initially be zero, which amount shall
be (A) increased (i) on each Excess Cash Payment Date (commencing with the
---------
Excess Cash Payment Date occurring 90 days after the fiscal year ending December
31, 1998) so long as any repayment required pursuant to Section 4.02(A)(f) has
been made, by an amount equal to that percentage of Excess Cash Flow of the
Borrower and its Subsidiaries which is permitted to be retained pursuant to
Section 4.02(A)(f) of Excess Cash Flow for the immediately preceding Excess Cash
Flow Period, (ii) on the date of the receipt by Holdings of the proceeds from
any registered public offering of Holdings Common Stock and/or from the issuance
of Holdings common stock pursuant to a Permitted Strategic Equity Issuance, in
each case so long as any repayment pursuant to Section 4.02(A)(d) has been made
and Holdings has contributed such proceeds to the Borrower in accordance with
Section 7.16, by an amount equal to 25% (or during any Reduced Leverage Period,
50%) of the net proceeds from such offering or issuance and (iii) on the date of
the receipt by Holdings of any Permitted Equity Proceeds so long as Holdings has
contributed or loaned such Permitted Equity Proceeds to the Borrower in
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accordance with Section 4.02(A)(d), by an amount equal to 100% of such Permitted
Equity Proceeds, and (B) reduced (i) on each Excess Cash Payment Date
-------
(commencing with the Excess Cash Payment Date occurring 90 days after the fiscal
year ending December 31, 1998) where Excess Cash Flow for the immediately
preceding Excess Cash Flow Period is a negative number, by such amount, (ii) at
the time any Capital Expenditure is made pursuant to Section 8.08(e), by the
amount thereof, (iii) at the time any Permitted Acquisition is made, by the
amount of Excess Proceeds expended in connection therewith, (iv) at the time
when Holdings redeems or prepays the Seller Subordinated Note pursuant to
Section 8.12(i), by the aggregate amount so expended by Holdings in connection
therewith, (v) at the time when the Borrower or any Domestic Subsidiary makes an
Intercompany Loan to a Foreign Subsidiary pursuant to Section 8.05(g), by the
amount (if any) of Excess Proceeds expended in connection therewith, and (vi) at
the time when the Borrower or any Domestic Subsidiary makes a contribution to or
a capitalization or forgiveness of Indebtedness of any Foreign Subsidiary
pursuant to Section 8.05(m), by the amount (if any) of Excess Proceeds expended
in connection therewith (it being understood that the Excess Proceeds Amount may
be reduced to an amount below zero after giving effect to the reductions
enumerated in clause (B) above).
"Existing Credit Agreement" shall mean the Credit Agreement, dated as
of June 28, 1995, among the Borrower, the financial institutions named therein
and The First National Bank of Chicago, as Agent, as in effect on the Effective
Date.
"Existing Indebtedness" shall have the meaning provided in
Section 6.24.
"Existing Indebtedness Agreements" shall have the meaning provided in
Section 5.13(c).
"Facility" shall mean any of the credit facilities established under
this Agreement, i.e., the A Term Loan Facility, the B Term Loan Facility or the
----
Revolving Loan Facility.
"Facing Fee" shall have the meaning provided in Section 3.01(c).
"Fees" shall mean all amounts payable pursuant to, or referred to
in, Section 3.01.
"Foreign Cash Equivalents" shall mean certificates of deposit or
bankers acceptances of any bank organized under the laws of Canada, Japan or any
country that is a member of the European Economic Community whose short-term
commercial paper rating from S&P is at least A-1 or the equivalent thereof or
from Moody's is at least P-1 or the equivalent thereof, in each case with
maturities of not more than twelve months from the date of acquisition.
"Foreign Pension Plan" shall mean any plan, fund (including, without
limitation, any superannuation fund) or other similar program established or
maintained outside the
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United States of America by Holdings or any one or more of its Subsidiaries
primarily for the benefit of employees of Holdings or such Subsidiaries residing
outside the United States of America, which plan, fund or other similar program
provides, or results in, retirement income, a deferral of income in
contemplation of retirement or payments to be made upon termination of
employment, and which plan is not subject to ERISA or the Code.
"Foreign Subsidiary" shall mean each Subsidiary of the Borrower that
is incorporated under the laws of any jurisdiction other than the United States
of America, any State thereof, or any territory thereof.
"Foreign Subsidiary Working Capital Indebtedness" shall have the
meaning provided in Section 8.04(h).
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time; it being understood and
agreed that determinations in accordance with GAAP for purposes of Section 8,
including defined terms as used therein, are subject (to the extent provided
therein) to Section 12.07(a).
"Guaranteed Creditors" shall mean and include each of the Agent, the
Collateral Agent, the Banks and each party (other than any Credit Party) party
to an Interest Rate Protection Agreement or Other Hedging Agreement to the
extent such party constitutes a Secured Creditor under the Security Documents.
"Guaranteed Obligations" shall mean (i) the full and prompt payment
when due (whether at the stated maturity, by acceleration or otherwise) of the
principal and interest on each Note issued by the Borrower to each Bank, and
Loans made, under this Agreement and all reimbursement obligations and Unpaid
Drawings with respect to Letters of Credit, together with all the other
obligations (including obligations which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due) and liabilities
(including, without limitation, indemnities, fees and interest thereon) of the
Borrower to such Bank now existing or hereafter incurred under, arising out of
or in connection with this Agreement or any other Credit Document and the due
performance and compliance with all the terms, conditions and agreements
contained in the Credit Documents by the Borrower and (ii) the full and prompt
payment when due (whether by acceleration or otherwise) of all obligations
(including obligations which, but for the automatic stay under Section 362(a) of
the Bankruptcy Code, would become due) of the Borrower owing under any such
Interest Rate Protection Agreement or Other Hedging Agreement entered into by
the Borrower or any of its Subsidiaries with any Bank or any affiliate thereof
(even if such Bank subsequently ceases to by a Bank under this Agreement for any
reason) so long as such Bank or affiliate participates in such Interest Rate
Protection Agreement or Other Hedging Agreement, and their subsequent assigns,
if any, whether now in existence or hereafter arising, and the due performance
and compliance with all terms, conditions and agreements contained therein.
"Guarantor" shall mean Holdings and each Subsidiary Guarantor.
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"Guaranty" shall mean and include each of the Holdings Guaranty and
the Subsidiary Guaranty.
"Hazardous Materials" shall mean (a) any petrochemical or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment that
contain dielectric fluid containing levels of polychlorinated biphenyls, and
radon gas; and (b) any chemicals, materials or substances defined as or included
in the definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "restricted hazardous materials," "extremely hazardous wastes,"
"restrictive hazardous wastes," "toxic substances," "toxic pollutants,"
"contaminants" or "pollutants," or words of similar meaning and regulatory
effect.
"Holdings" shall have the meaning provided in the first paragraph of
this Agreement.
"Holdings Class L Common Stock" shall have the meaning provided in
Section 6.16.
"Holdings Common Stock" shall have the meaning provided in
Section 6.16.
"Holdings Guaranty" shall mean the guaranty of Holdings pursuant to
Section 13.
"Holdings Tax Allocation Agreement" shall mean the Tax Sharing
Agreement, dated as of the Effective Date, among Holdings and the Borrower and
its Domestic Subsidiaries.
"Indebtedness" of any Person shall mean without duplication (i) all
indebtedness of such Person for borrowed money, (ii) the deferred purchase price
of assets or services payable to the sellers thereof or any of such seller's
assignees which in accordance with GAAP would be shown on the liability side of
the balance sheet of such Person but excluding deferred rent as determined in
accordance with GAAP, (iii) the face amount of all letters of credit issued for
the account of such Person and, without duplication, all drafts drawn
thereunder, (iv) all Indebtedness of a second Person secured by any Lien on any
property owned by such first Person, whether or not such Indebtedness has been
assumed, (v) all Capitalized Lease Obligations of such Person, (vi) all
obligations of such Person to pay a specified purchase price for goods or
services whether or not delivered or accepted, i.e., take-or-pay and similar
----
obligations, (vii) all obligations under Interest Rate Protection Agreements and
Other Hedging Agreements and (viii) all Contingent Obligations of such Person,
provided, that Indebtedness shall not include trade payables and accrued
- --------
expenses, in each case arising in the ordinary course of business.
"Indebtedness to be Refinanced" shall mean the indebtedness arising
pursuant to the Existing Credit Agreement.
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"Initial Borrowing Date" shall mean the date upon which the Term Loans
are initially incurred hereunder.
"Intercompany Loan" shall have the meaning provided in
Section 8.05(g).
"Intercompany Notes" shall mean promissory notes, in the form of
Exhibit K, evidencing Intercompany Loans.
"Interest Coverage Ratio" shall mean, for any period, the ratio of
Consolidated EBITDA to Consolidated Interest Expense for such period.
"Interest Period," with respect to any Eurodollar Loan, shall mean the
interest period applicable thereto, as determined pursuant to Section 1.09.
"Interest Rate Protection Agreement" shall mean any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement, interest
rate hedging agreement or other similar agreement or arrangement.
"Interest Reduction Discount" shall mean initially zero, provided that
--------
during any Applicable Period the Interest Reduction Discount shall be the
respective percentage per annum set forth in clause (A) or (B) below if, but
only if, as of the Test Date with respect to such Applicable Period the
condition set forth in clause (A) or (B) below is met:
(A) 1/4 of 1% if the Leverage Ratio on such Test Date is less than
3.0:1.0; or
(B) 1/2 of 1% if the Leverage Ratio on such Test Date is less than
2.5:1.0.
Notwithstanding anything to the contrary contained above in this definition, the
Interest Reduction Discount shall be zero at any time when an Event of Default
shall exist.
"L/C Supportable Indebtedness" shall mean (i) Foreign Subsidiary
Working Capital Indebtedness, (ii) obligations of the Borrower or its
Subsidiaries incurred in the ordinary course of business with respect to
insurance obligations and workers' compensation, surety bonds and other similar
statutory obligations and (iii) such other obligations of the Borrower or any of
its Subsidiaries as are reasonably acceptable to the Agent and the respective
Letter of Credit Issuer and otherwise permitted to exist pursuant to the terms
of this Agreement.
"Leasehold" of any Person shall mean all of the right, title and
interest of such Person as lessee or licensee in, to and under leases or
licenses of land, improvements and/or fixtures.
"Letter of Credit" shall have the meaning provided in Section 2.01(a).
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"Letter of Credit Fee" shall have the meaning provided in Section
3.01(b).
"Letter of Credit Issuer" shall mean BTCo, and any RL Bank which at
the request of the Borrower and with the consent of the Agent agrees, in such RL
Bank's sole discretion, to become a Letter of Credit Issuer for the purpose of
issuing Letters of Credit pursuant to Section 2.
"Letter of Credit Outstandings" shall mean, at any time, the sum of,
without duplication, (i) the aggregate Stated Amount of all outstanding Letters
of Credit and (ii) the aggregate amount of all Unpaid Drawings in respect of all
Letters of Credit.
"Letter of Credit Request" shall have the meaning provided in
Section 2.02(a).
"Leverage Ratio" shall mean, at any time, the ratio of Consolidated
Debt at such time to Consolidated EBITDA for the Test Period then last ended.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement, any
financing or similar statement or notice filed under the UCC or any similar
recording or notice statute, and any lease having substantially the same effect
as the foregoing).
"Loan" shall mean each and every Loan made by any Bank hereunder,
including A Term Loans, B Term Loans, Revolving Loans or Swingline Loans.
"Majority Banks" of any Facility shall mean those Non-Defaulting Banks
which would constitute the Required Banks under, and as defined in, this
Agreement if all outstanding Obligations of the other Facilities under this
Agreement were repaid in full and all Commitments with respect thereto were
terminated.
"Management Agreements" shall have the meaning provided in
Section 5.13(e).
"Mandatory Borrowing" shall have the meaning provided in
Section 1.01(c).
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Adverse Effect" shall mean a material adverse effect on the
business, properties, assets, liabilities, condition (financial or otherwise) or
prospects of the Borrower, Holdings and its Subsidiaries taken as a whole or the
Borrower and its Subsidiaries taken as a whole.
"Material Contracts" shall have the meaning provided in
Section 5.13(h).
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"Maturity Date" with respect to any Facility shall mean either the A
Term Loan Maturity Date, the B Term Loan Maturity Date, or the Revolving Loan
Maturity Date, as the case may be.
"Maximum Swingline Amount" shall mean $10,000,000.
"Minimum Borrowing Amount" shall mean (i) for Base Rate Loans (other
than Swingline Loans), $1,000,000; (ii) for Eurodollar Loans, $1,000,000; and
(iii) for Swingline Loans, $250,000.
"Mortgage" shall have the meaning provided in Section 5.12(a).
"Mortgage Policies" shall have the meaning provided in
Section 5.12(b).
"Mortgaged Properties" shall mean and include (i) all Real Properties
owned and leased by Holdings and its Domestic Subsidiaries to the extent
designated as such on Annex III and (ii) each Real Property subjected to a
mortgage in favor of the Collateral Agent for the benefit of the Secured
Creditors pursuant to Section 7.11.
"NAIC" shall have the meaning provided in Section 1.10(c).
"Net Proceeds" shall mean, with respect to any Asset Sale, the
Proceeds resulting therefrom net of (a) cash expenses of sale (including
brokerage fees, if any, transfer taxes and payment of principal, premium and
interest of Indebtedness other than the Loans required to be repaid as a result
of such Asset Sale) and (b) incremental income taxes paid or payable as a result
thereof.
"Non-Defaulting Bank" shall mean each Bank other than a Defaulting
Bank.
"Note" shall mean each A Term Note, each B Term Note, each Revolving
Note and the Swingline Note.
"Notice of Borrowing" shall have the meaning provided in Section 1.03.
"Notice of Conversion" shall have the meaning provided in
Section 1.06.
"Notice Office" shall mean the office of the Agent located at One
Bankers Trust Plaza, New York, New York 10006 or such other office as the Agent
may designate to Holdings, the Borrower and the Banks from time to time.
"Obligations" shall mean all amounts, direct or indirect, contingent
or absolute, of every type or description, and at any time existing, owing to
the Agent, the Collateral Agent or any Bank pursuant to the terms of this
Agreement or any other Credit Document.
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"Original Acquisition" shall mean the acquisition by the Borrower and
its Subsidiaries of the Wesley-Jessen conventional and disposable soft contact
lenses business from the Schering Corporation.
"Other Hedging Agreements" shall mean any foreign exchange contracts,
currency swap agreements or other similar agreements or arrangements designed to
protect against fluctuations in currency values.
"Participant" shall have the meaning provided in Section 2.04(a).
"Payment Office" shall mean the office of the Agent located at One
Bankers Trust Plaza, New York, New York 10006 or such other office as the Agent
may designate to Holdings, the Borrower and the Banks from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"Pension Plan Refund" shall mean any cash payments (net of reasonable
costs associated therewith, including income, excise and other taxes payable
thereon) received by Holdings and/or of its Subsidiaries from any return of any
surplus assets from any single Plan or Foreign Pension Plan, other than any
return of amounts representing overestimates of any amounts due under any single
Plan or Foreign Pension Plan.
"Permitted Acquisition" shall have the meaning provided in
Section 8.02(q).
"Permitted Covenant" shall mean (i) any periodic reporting covenant,
(ii) any covenant restricting payments by Holdings with respect to any
securities of Holdings which are junior to the Permitted Holdings PIK
Securities, (iii) any covenant the default of which can only result in an
increase in the amount of any redemption price, repayment amount, dividend rate
or interest rate, (iv) any covenant the default of which gives rise only to
rights or remedies which are subject to subordination terms reasonably
acceptable to the Agent, (v) any covenant providing board observance rights with
respect to Holdings' board of directors and (vi) any other covenant that does
not adversely affect the interests of the Banks (as reasonably determined by the
Agent).
"Permitted Encumbrances" shall mean (i) those liens, encumbrances and
other matters affecting title to any Mortgaged Property listed in the Mortgage
Policies in respect thereof and found, on the date of delivery of such Mortgage
Policies to the Agent in accordance with the terms hereof, reasonably acceptable
by the Agent, (ii) as to any particular Mortgaged Property at any time, such
easements, encroachments, covenants, rights of way, minor defects,
irregularities or encumbrances on title which do not, in the reasonable opinion
of the Agent, materially impair such Mortgaged Property for the purpose for
which it is held by the mortgagor thereof, or the lien held by the Collateral
Agent, (iii) municipal and zoning ordinances, which are not violated in any
material respect by the existing improvements and
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the present use made by the mortgagor thereof of the Premises (as defined in the
respective Mortgage), (iv) general real estate taxes and assessments not yet
delinquent, and (v) such other items as the Agent may consent to (such consent
not to be unreasonably withheld).
"Permitted Equity Proceeds" shall have the meaning provided in Section
4.02(A)(d).
"Permitted Holdings PIK Securities" shall mean any preferred stock or
subordinated promissory note of Holdings (or any security of Holdings that is
convertible or exchangeable into any preferred stock or subordinated promissory
note of Holdings), so long as the terms of any such preferred stock,
subordinated promissory note or security of Holdings (i) do not provide any
collateral security, (ii) do not provide any guaranty or other support by the
Borrower or any Subsidiaries of the Borrower, (iii) do not contain any mandatory
put, redemption, repayment, sinking fund or other similar provision occurring
before the ninth anniversary of the Initial Borrowing Date, (iv) do not require
the cash payment of dividends or interest before the ninth anniversary of the
Initial Borrowing Date, (v) do not contain any covenants other than any
Permitted Covenant, (vi) do not grant the holders thereof any voting rights
except for (x) voting rights required to be granted to such holders under
applicable law and (y) limited customary voting rights on fundamental matters
such as mergers, consolidations, sales of substantial assets, or liquidations
involving Holdings, and (vii) are otherwise reasonably satisfactory to the
Agent.
"Permitted Liens" shall have the meaning provided in Section 8.03.
"Permitted Sale-Leaseback Transactions" shall mean the sale and
leaseback by the Borrower and/or any of its Subsidiaries of vehicles owned by
such Persons.
"Permitted Strategic Equity Issuance" shall mean any issuance of
Holdings common stock to a Person, so long as (i) the purpose of such investment
in Holdings by such Person is to form or enhance a strategic alliance or
relationship with Holdings and/or its Subsidiaries and (ii) after giving effect
to any such issuance of Holdings common stock, such Person and its Affiliates
shall not own more than 20% of the common stock of Holdings on a fully diluted
basis.
"Person" shall mean any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or other enterprise
or any government or political subdivision or any agency, department or
instrumentality thereof.
"Plan" shall mean any multiemployer or single-employer plan as defined
in Section 4001 of ERISA, which is maintained or contributed to by (or to which
there is an obligation to contribute of) Holdings, any of its Subsidiaries or
any ERISA Affiliate and each such plan for the five calendar year period
immediately following the latest date on which Holdings, any of its Subsidiaries
or any ERISA Affiliate maintained, contributed to or had an obligation to
contribute to such plan.
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"Pledge Agreement" shall have the meaning provided in Section 5.10(a).
"Pledged Securities" shall mean all the Pledged Securities as defined
in the Pledge Agreement.
"Prime Lending Rate" shall mean the rate which BTCo announces from
time to time as its prime lending rate, the Prime Lending Rate to change when
and as such prime lending rate changes. The Prime Lending Rate is a reference
rate and does not necessarily represent the lowest or best rate actually charged
to any customer. BTCo may make commercial loans or other loans at rates of
interest at, above or below the Prime Lending Rate.
"Proceeds" shall mean, with respect to any Asset Sale, the aggregate
cash payments (including any cash received by way of deferred payment pursuant
to a note receivable issued in connection with such Asset Sale, other than the
portion of such deferred payment constituting interest, but only as and when so
received) received by Holdings and/or any of its Subsidiaries from such Asset
Sale.
"Projections" shall have the meaning provided in Section 5.16.
"Puerto Rico Pledge Agreement" shall have the meaning provided in
Section 5.12(b).
"Puerto Rico Security Documents" shall mean the Puerto Rico Pledge
Agreement, the Chattel Mortgage, dated as of October 2, 1996, between Wesley-
Jessen (Puerto Rico), Inc., a Delaware corporation, as mortgagor, and the
Collateral Agent, as mortgagee and the Chattel Mortgage Note, dated as of
October 2, 1996, by Wesley-Jessen (Puerto Rico), Inc., a Delaware corporation,
in favor of the Collateral Agent.
"Quarterly Payment Date" shall mean the last Business Day of each
March, June, September and December commencing the last Business Day of December
1996.
"Real Property" of any Person shall mean all of the right, title and
interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"Recovery Event" shall mean the receipt by Holdings or any of its
Subsidiaries of any insurance or condemnation proceeds payable (i) by reason of
any theft, physical destruction or damage or any other similar event with
respect to any properties or assets of Holdings or any of its Subsidiaries, (ii)
by reason any condemnation, taking, seizing or similar event with respect to any
properties or assets of Holdings or any of its Subsidiaries and (iii) under any
policy of insurance required to be maintained under Section 7.03.
"Reduced Leverage Period" shall mean any Applicable Period if, and
only if, the Leverage Ratio was less than or equal to 3.0:1.0 on the Test Date
with respect thereto.
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"Refinancing" shall mean and include the refinancing and repayment in
full of all amounts outstanding under, and the termination in full of all
commitments and letters of credit in respect of, the Indebtedness to be
Refinanced.
"Refinancing Documents" shall mean each of the agreements, documents
and instruments entered into in connection with the Refinancing.
"Register" shall have the meaning provided in Section 7.13.
"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing reserve requirements.
"Regulation U" shall mean Regulation U of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing margin requirements.
"Related Party" shall mean any Affiliate of Bain Capital on the
Effective Date, provided that for purposes of the definition of "Change of
--------
Control Event," the term Related Party shall not include (x) any portfolio
company of Bain Capital or any Affiliate of Bain Capital or (y) any officer or
director of Holdings or any of its Subsidiaries if not also a partner or
stockholder of Bain Capital on the Effective Date.
"Release" means disposing, discharging, injecting, spilling, pumping,
leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing,
pouring and the like, into or upon any land or water or air, or otherwise
entering into the environment.
"Replaced Bank" shall have the meaning provided in Section 1.13.
"Replacement Bank" shall have the meaning provided in Section 1.13.
"Reportable Event" shall mean an event described in Section 4043(c) of
ERISA with respect to a Plan other than those events as to which the 30-day
notice period is waived under subsection .13, .14, .16, .18, .19 or .20 of PBGC
Regulation Section 2615.
"Required Banks" shall mean Non-Defaulting Banks the sum of whose
outstanding Term Loans and Revolving Loan Commitments (or, if after the Total
Revolving Loan Commitment has been terminated, outstanding Revolving Loans and
RL Percentages of outstanding Swingline Loans and Letter of Credit Outstandings)
constitute greater than 50% of the sum of (i) the total outstanding Term Loans
of Non-Defaulting Banks and (ii) the Total Revolving Loan Commitment less the
aggregate Revolving Loan Commitments of Defaulting Banks (or, if after the Total
Revolving Loan Commitment has been terminated, the total outstanding Revolving
Loans of Non-Defaulting Banks and the aggregate RL Percentages of
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all Non-Defaulting Banks of the total outstanding Swingline Loans and Letter of
Credit Outstandings at such time).
"Restructuring Expenditures" shall mean nonrecurring expenditures and
charges arising out of the restructuring, consolidation, severance or
discontinuance of any portion of the operations of any entities or businesses of
Holdings and its Subsidiaries in connection with the Acquisition and the
Original Acquisition.
"Restructuring Reserves" shall mean, at any time, an amount equal to
$24,500,000 less all Restructuring Expenditures theretofore made after the
Initial Borrowing Date.
"Returns" shall have the meaning provided in Section 6.23.
"Revolving Loan" shall have the meaning provided in Section
1.01(A)(c).
"Revolving Loan Commitment" shall mean, with respect to each Bank, the
amount set forth opposite such Bank's name in Annex I directly below the column
entitled "Revolving Loan Commitment," as the same may be reduced from time to
time pursuant to Section 3.02, 3.03, 4.01(b) and/or 9 or otherwise modified
pursuant to Section 1.13 and/or 12.04(b).
"Revolving Loan Facility" shall mean the Facility evidenced by the
Total Revolving Loan Commitment.
"Revolving Loan Maturity Date" shall mean February 28, 2002.
"Revolving Note" shall have the meaning provided in Section 1.05(a).
"RL Bank" shall mean at any time each Bank with a Revolving Loan
Commitment or with outstanding Revolving Loans.
"RL Percentage" shall mean at any time for each RL Bank, the
percentage obtained by dividing such RL Bank's Revolving Loan Commitment by the
Total Revolving Loan Commitment; provided, that if the Total Revolving Loan
--------
Commitment has been terminated, the RL Percentage of each RL Bank shall be
determined by dividing such RL Bank's Revolving Loan Commitment immediately
prior to such termination by the Total Revolving Loan Commitment immediately
prior to such termination.
"Rollover Amount" shall have the meaning provided in Section 8.08(b),
provided that for purposes of the definition of Excess Cash Flow, for the Excess
- --------
Cash Flow Period ending December 31, 1997 only, the term Rollover Amount shall
mean $23,000,000 minus the aggregate amount of Capital Expenditures made during
the period from the Initial Borrowing Date through December 31, 1997 under
Section 8.08(a).
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"Scheduled A Repayment" shall have the meaning provided in Section
4.02(A)(b)(i).
"Scheduled B Repayment" shall have the meaning provided in Section
4.02(A)(b)(ii).
"Scheduled Repayment" shall mean any Scheduled A Repayment and
Scheduled B Repayment.
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto.
"Section 4.04(b)(ii) Certificate" shall have the meaning provided in
Section 4.04(b)(ii).
"Secured Creditors" shall have the meaning provided in the respective
Security Documents.
"Security Agreement" shall have the meaning provided in Section
5.10(b).
"Security Agreement Collateral" shall mean all "Collateral" as defined
in the Security Agreement.
"Security Documents" shall mean and include the Security Agreement,
the Pledge Agreement, each Puerto Rico Security Documents, each Mortgage, each
Additional Security Document, if any and each other document or instrument
entered into pursuant to Sections 5.10 and 7.16, if any, in each case as and
when executed and delivered in accordance with the terms of this Agreement and
as the same may be amended, modified or supplemented from time to time in
accordance with the terms thereof and hereof.
"Seller" shall mean Pilkington plc, a company registered under the
laws of England and Wales.
"Seller Subordinated Note" shall mean an unsecured junior subordinated
note issued by Holdings (and not guaranteed or supported in any way by the
Borrower or any of the Borrower's Subsidiaries or any other Person) in favor of
the Seller, in the form delivered to the Banks pursuant to Section 5.09(d) and
as amended, modified or supplemented from time to time in accordance with
Section 8.12.
"Senior Officer" shall mean Chief Executive Officer, President, Chief
Financial Officer, Treasurer, Controller or Secretary or any other senior
officer of Holdings or any of its Subsidiaries with knowledge of, or
responsibility for, the financial affairs of such Person.
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"Shareholder Subordinated Note" shall mean an unsecured junior
subordinated note issued by Holdings (and not guaranteed or supported in any way
by the Borrower or any of its Subsidiaries) in the form of Exhibit L, as the
same may be amended, modified or supplemented from time to time pursuant to the
terms hereof and thereof.
"Shareholders' Agreements" shall have the meaning set forth in Section
5.13(d).
"Start Date" shall mean the first day of any Applicable Period.
"Stated Amount" of each Letter of Credit shall mean at any time the
maximum amount available to be drawn thereunder (regardless of whether any
conditions for drawing could then be met).
"Subsidiary" of any Person shall mean and include (i) any corporation
more than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries and (ii) any partnership, association, joint
venture or other entity in which such Person directly or indirectly through
Subsidiaries, has more than a 50% equity interest at the time.
"Subsidiary Guarantor" shall mean each Subsidiary of the Borrower
(other than a Foreign Subsidiary except to the extent otherwise provided in
Section 7.15) that is or becomes a party to the Subsidiary Guaranty.
"Subsidiary Guaranty" shall have the meaning provided in Section 5.11.
"Supermajority Banks" of any Facility shall mean those Non-Defaulting
Banks which would constitute the Required Banks under, and as defined in, this
Agreement if (x) all outstanding Obligations of the other Facilities under this
Agreement were repaid in full and all Commitments with respect thereto were
terminated and (y) the percentage "50%" contained therein were changed to "66-
2/3%."
"Swingline Expiry Date" shall mean the date which is five Business
Days prior to the Revolving Loan Maturity Date.
"Swingline Loan" shall have the meaning provided in Section 1.01(B).
"Swingline Note" shall have the meaning provided in Section 1.05(a).
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"Syndication Date" shall mean that date upon which the Agent
determines (and notifies the Borrower and the Banks) that the primary
syndication (and resulting addition of Persons as Banks pursuant to Section
12.04(b)) has been completed.
"Tax Allocation Agreements" shall have the meaning provided in Section
5.13(g).
"Taxes" shall have the meaning provided in Section 4.04.
"Term Loan" shall mean each A Term Loan and each B Term Loan.
"Term Loan Commitment" shall mean, with respect to each Bank at any
time, the sum of the A Term Loan Commitment and the B Term Loan Commitment of
such Bank at such time.
"Term Loan Facilities" shall mean the A Term Loan Facility and the B
Term Loan Facility.
"Test Date" shall mean, with respect to any Applicable Period, the
last day of the most recent fiscal quarter or fiscal year, as the case may be,
ended immediately prior to the Start Date with respect to such Applicable
Period.
"Test Period" shall mean (i) for any determination made prior to
September 30, 1997, the period from October 1, 1996 to the last day of the
fiscal quarter of the Borrower then last ended and (ii) for any determination
made thereafter, the four consecutive fiscal quarters of the Borrower then last
ended.
"Total A Term Loan Commitment" shall mean the sum of the A Term Loan
Commitments of each of the Banks.
"Total B Term Loan Commitment" shall mean the sum of the B Term Loan
Commitments of each of the Banks.
"Total Commitment" shall mean the sum of the Total Term Loan
Commitment and the Total Revolving Loan Commitment.
"Total Revolving Loan Commitment" shall mean the sum of the Revolving
Loan Commitments of each of the RL Banks.
"Total Term Loan Commitment" shall mean the sum of the Total A Term
Loan Commitment and the Total B Term Loan Commitment.
"Total Unutilized Revolving Loan Commitment" shall mean, at any time,
(i) the Total Revolving Loan Commitment at such time less (ii) the sum of the
aggregate principal
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amount of all Revolving Loans and Swingline Loans at such time plus the Letter
of Credit Outstandings at such time.
"Transaction" shall mean, collectively, (i) the Acquisition, (ii) the
Refinancing, (iii) the occurrence of Credit Events hereunder on the Initial
Borrowing Date, (iv) such other transactions as contemplated by the Documents
and (v) the payment of fees and expenses in connection with the foregoing.
"Type" shall mean any type of Loan determined with respect to the
interest option applicable thereto, i.e., a Base Rate Loan or a Eurodollar Loan.
----
"UCC" shall mean the Uniform Commercial Code as in effect from time to
time in the relevant jurisdiction.
"Unfunded Current Liability" of any Plan shall mean the amount, if
any, by which the actuarial present value of the accumulated plan benefits under
the Plan as of the close of its most recent plan year exceeds the fair market
value of the assets allocable thereto, each determined in accordance with
Statement of Financial Accounting Standards No. 35, based upon the actuarial
assumptions used by the Plan's actuary in the most recent annual valuation of
the Plan.
"Unpaid Drawing" shall have the meaning provided in Section 2.03(a).
"U.S. Dollars" and the sign "$" shall each mean freely transferable
lawful money of the United States of America.
"Waivable Mandatory Repayment" shall have the meaning provided in
Section 4.02(c).
"Wesley-Jessen (Puerto Rico)" shall mean Wesley-Jessen (Puerto Rico),
Inc., a Delaware corporation.
"West Coast Asset Sale" shall mean the sale by the Borrower and/or any
of its Subsidiaries of (x) any or all of the assets on or at the Borrower's San
Diego, California facility, but excluding the Real Property relating to such
facility, and (y) any or all of the assets on or at the Borrower's Sunnyvale,
California facility, in the case of both clause (x) and (y) above to the extent
sold in connection with the restructuring or transfer to other facilities of the
operations at such facility.
"Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any
corporation 100% of whose capital stock (other than director's qualifying shares
and/or other nominal amounts of shares required to be held other than by such
Person under applicable law) is at the time owned by such Person and/or one or
more Wholly-Owned Subsidiaries of such Person and
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(ii) any partnership, association, joint venture or other entity in which such
Person and/or one or more Wholly-Owned Subsidiaries of such Person has a 100%
equity interest at such time.
"Working Capital" shall mean the excess of Consolidated Current Assets
over Consolidated Current Liabilities.
"Written," "written" or "in writing" shall mean any form of written
communication or a communication by means of telex, facsimile device, telegraph
or cable.
SECTION 11. The Agent.
---------
11.01 Appointment. Each Bank hereby irrevocably designates and
-----------
appoints BTCo as Agent of such Bank (such term to include for purposes of this
Section 11, BTCo acting as Collateral Agent) to act as specified herein and in
the other Credit Documents, and each such Bank hereby irrevocably authorizes
BTCo as the Agent to take such action on its behalf under the provisions of this
Agreement and the other Credit Documents and to exercise such powers and perform
such duties as are expressly delegated to the Agent by the terms of this
Agreement and the other Credit Documents, together with such other powers as are
reasonably incidental thereto. The Agent agrees to act as such upon the express
conditions contained in this Section 11. Notwithstanding any provision to the
contrary elsewhere in this Agreement or in any other Credit Document, the Agent
shall not have any duties or responsibilities, except those expressly set forth
herein or in the other Credit Documents, or any fiduciary relationship with any
Bank, and no implied covenants, functions, responsibilities, duties, obligations
or liabilities shall be read into this Agreement or otherwise exist against the
Agent. The provisions of this Section 11 are solely for the benefit of the
Agent and the Banks, and neither Holdings nor any of its Subsidiaries shall have
any rights as a third party beneficiary of any of the provisions hereof. In
performing its functions and duties under this Agreement, the Agent shall act
solely as agent of the Banks and the Agent does not assume and shall not be
deemed to have assumed any obligation or relationship of agency or trust with or
for Holdings or any of its Subsidiaries.
11.02 Delegation of Duties. The Agent may execute any of its duties
--------------------
under this Agreement or any other Credit Document by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care except to the extent otherwise required by Section 11.03.
11.03 Exculpatory Provisions. Neither the Agent nor any of its
----------------------
officers, directors, employees, agents, attorneys-in-fact or affiliates shall be
(i) liable for any action lawfully taken or omitted to be taken by it or such
Person in its capacity as Agent under or in connection with this Agreement or
the other Credit Documents (except for its or such Person's own gross negligence
or willful misconduct) or (ii) responsible in any manner to any of the Banks for
any recitals, statements, representations or warranties made by Holdings, any of
its Subsidiaries or
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any of their respective officers contained in this Agreement or the other Credit
Documents, any other Document or in any certificate, report, statement or other
document referred to or provided for in, or received by the Agent under or in
connection with, this Agreement or any other Document or for any failure of
Holdings or any of its Subsidiaries or any of their respective officers to
perform its obligations hereunder or thereunder. The Agent shall not be under
any obligation to any Bank to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or the other Documents, or to inspect the properties, books or records
of Holdings or any of its Subsidiaries. The Agent shall not be responsible to
any Bank for the effectiveness, genuineness, validity, enforceability,
collectability or sufficiency of this Agreement or any other Document or for any
representations, warranties, recitals or statements made herein or therein or
made in any written or oral statement or in any financial or other statements,
instruments, reports, certificates or any other documents in connection herewith
or therewith furnished or made by the Agent to the Banks or by or on behalf of
Holdings or any of its Subsidiaries to the Agent or any Bank or be required to
ascertain or inquire as to the performance or observance of any of the terms,
conditions, provisions, covenants or agreements contained herein or therein or
as to the use of the proceeds of the Loans or of the existence or possible
existence of any Default or Event of Default.
11.04 Reliance by Agent. The Agent shall be entitled to rely, and
-----------------
shall be fully protected in relying, upon any note, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, facsimile, telex
or teletype message, statement, order or other document or conversation believed
by it to be genuine and correct and to have been signed, sent or made by the
proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to Holdings or any of its Subsidiaries),
independent accountants and other experts selected by the Agent. The Agent
shall be fully justified in failing or refusing to take any action under this
Agreement or any other Credit Document unless it shall first receive such advice
or concurrence of the Required Banks as it deems appropriate or it shall first
be indemnified to its satisfaction by the Banks against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action. The Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement and the other Credit
Documents in accordance with a request of the Required Banks (or all of the
Banks, to the extent required by this Agreement), and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Banks.
11.05 Notice of Default. The Agent shall not be deemed to have
-----------------
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has actually received notice from a Bank, Holdings or
the Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default." In the event
that the Agent receives such a notice, the Agent shall give prompt notice
thereof to the Banks. The Agent shall take such action with respect to such
Default or Event of Default as shall be reasonably directed by the Required
Banks; provided, that, unless and until the Agent shall have received such
--------
directions, the Agent may (but shall not be obligated to) take
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such action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the best interests of the Banks.
11.06 Non-Reliance on Agent and Other Banks. Each Bank expressly
-------------------------------------
acknowledges that neither the Agent nor any of its respective officers,
directors, employees, agents, attorneys-in-fact or affiliates have made any
representations or warranties to it and that no act by the Agent hereinafter
taken, including any review of the affairs of Holdings or any of its
Subsidiaries, shall be deemed to constitute any representation or warranty by
the Agent to any Bank. Each Bank represents to the Agent that it has,
independently and without reliance upon the Agent or any other Bank, and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, assets, operations, property,
financial and other condition, prospects and creditworthiness of Holdings and
its Subsidiaries and made its own decision to make its Loans hereunder and enter
into this Agreement. Each Bank also represents that it will, independently and
without reliance upon the Agent or any other Bank, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
under this Agreement, and to make such investigation as it deems necessary to
inform itself as to the business, assets, operations, property, financial and
other condition, prospects and creditworthiness of Holdings and its
Subsidiaries. The Agent shall not have any duty or responsibility to provide
any Bank with any credit or other information concerning the business,
operations, assets, property, financial and other condition, prospects or
creditworthiness of Holdings or any of its Subsidiaries which may come into the
possession of the Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.
11.07 Indemnification. The Banks agree to indemnify the Agent in its
---------------
capacity as such ratably according to their respective "percentages" as used in
determining the Required Banks at such time or, if the Commitments have
terminated and all Loans have been repaid in full, as determined immediately
prior to such termination and repayment (with such "percentages" to be
determined as if there are no Defaulting Banks), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, reasonable expenses or disbursements of any kind whatsoever which may at
any time (including, without limitation, at any time following the payment of
the Obligations) be imposed on, incurred by or asserted against the Agent in its
capacity as such in any way relating to or arising out of this Agreement or any
other Credit Document, or any documents contemplated by or referred to herein or
the transactions contemplated hereby or any action taken or omitted to be taken
by the Agent under or in connection with any of the foregoing, but only to the
extent that any of the foregoing is not paid by Holdings or any of its
Subsidiaries; provided, that no Bank shall be liable to the Agent for the
--------
payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
primarily from the gross negligence or willful misconduct of the Agent. If any
indemnity furnished to the Agent for any purpose shall, in the opinion of the
Agent be insufficient or become impaired (other than as a result of the gross
negligence or willful misconduct of the Agent), the Agent may call for
additional indemnity and cease, or not commence, to do the acts
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indemnified against until such additional indemnity is furnished. The agreements
in this Section 11.07 shall survive the payment of all Obligations.
11.08 Agent in its Individual Capacity. The Agent and its affiliates
--------------------------------
may make loans to, accept deposits from and generally engage in any kind of
business with Holdings and its Subsidiaries as though the Agent were not the
Agent hereunder. With respect to the Loans made by it and all Obligations owing
to it, the Agent shall have the same rights and powers under this Agreement as
any Bank and may exercise the same as though it were not the Agent and the terms
"Bank" and "Banks" shall include the Agent in its individual capacity. The
Agent and/or its affiliates may own stock of Holdings or any Subsidiary of
Holdings and may accept deposits from, lend money to, and generally engage in
any kind of banking, trust or other business with Holdings or any Affiliate of
Holdings as if it were not performing the duties specified herein, and may
accept fees and other consideration from any Credit Party for services in
connection with this Agreement and otherwise without having to account for the
same to the Banks.
11.09 Holders. The Agent may deem and treat the payee of any Note as
-------
the owner thereof for all purposes hereof unless and until a written notice of
the assignment, transfer or endorsement thereof, as the case may be, shall have
been filed with the Agent. Any request, authority or consent of any Person or
entity who, at the time of making such request or giving such authority or
consent, is the holder of any Note shall be conclusive and binding on any
subsequent holder, transferee, assignee or indorsee, as the case may be, of such
Note or of any Note or Notes issued in exchange therefor.
11.10 Resignation of the Agent; Successor Agent. The Agent may
-----------------------------------------
resign as the Agent upon 20 days' notice to the Banks and, unless a Default of
the type referred to in Section 9.05 has occurred and is continuing, to the
Borrower. Upon the resignation of the Agent, the Required Banks shall appoint
from among the Banks a successor Agent which is a bank or a trust company for
the Banks subject, to the extent that no payment Default or Event of Default has
occurred and is then continuing, to prior approval by the Borrower (such
approval not to be unreasonably withheld or delayed), whereupon such successor
agent shall succeed to the rights, powers and duties of the Agent, and the term
"Agent" shall include such successor agent effective upon its appointment, and
the resigning Agent's rights, powers and duties as the Agent shall be
terminated, without any other or further act or deed on the part of such former
Agent or any of the parties to this Agreement. If a successor Agent shall not
have been so appointed within such 20 day period after the date such notice of
resignation was given by the Agent, the Agent's resignation shall become
effective and the Banks shall thereafter perform all duties of the Agent
hereunder and/or under any other Credit Documents until such time, if any, as
the Required Banks appoint a successor Agent as provided above. After the
resignation of the Agent hereunder, the provisions of this Section 11 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement.
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SECTION 12. Miscellaneous.
-------------
12.01 Payment of Expenses, etc. The Borrower hereby agrees to: (i)
-------------------------
whether or not the transactions herein contemplated are consummated, pay all
reasonable out-of-pocket costs and expenses of the Agent (including, without
limitation, the reasonable fees and disbursements of White & Case and local
counsel) in connection with the negotiation, preparation, execution and delivery
of the Credit Documents and the documents and instruments referred to therein
and any amendment, waiver or consent relating thereto and in connection with the
Agent's syndication efforts with respect to this Agreement; (ii) pay all
reasonable out-of-pocket costs and expenses of the Agent and each of the Banks
in connection with the enforcement of the Credit Documents and the documents and
instruments referred to therein and, after an Event of Default shall have
occurred and be continuing, the protection of the rights of the Agent and each
of the Banks thereunder (including, without limitation, the reasonable fees and
disbursements of counsel (including in-house counsel) for the Agent and for each
of the Banks); (iii) pay and hold each of the Banks harmless from and against
any and all present and future stamp and other similar taxes with respect to the
foregoing matters and save each of the Banks harmless from and against any and
all liabilities with respect to or resulting from any delay or omission (other
than to the extent attributable to such Bank) to pay such taxes; and (iv)
indemnify the Agent, the Collateral Agent and each Bank, its officers,
directors, trustees, employees, representatives and agents from and hold each of
them harmless against any and all losses, liabilities, claims, damages or
expenses incurred by any of them as a result of, or arising out of, or in any
way related to, or by reason of, (a) any investigation, litigation or other
proceeding (whether or not the Agent, the Collateral Agent or any Bank is a
party thereto and whether or not any such investigation, litigation or other
proceeding is between or among the Agent, the Collateral Agent, any Bank, any
Credit Party or any third Person or otherwise) related to the entering into
and/or performance of this Agreement or any other Document or the use of the
proceeds of any Loans hereunder or the Transaction or the consummation of any
other transactions contemplated in any Document (but excluding any such losses,
liabilities, claims, damages or expenses to the extent incurred by reason of the
gross negligence or willful misconduct of the Person to be indemnified), or (b)
the actual or alleged presence of Hazardous Materials in the air, surface water
or groundwater or on the surface or subsurface of any Real Property or any
Environmental Claim, in each case, including, without limitation, the reasonable
fees and disbursements of counsel and independent consultants incurred in
connection with any such investigation, litigation or other proceeding.
12.02 Right of Setoff, Collateral Matters. (a) In addition to any
-----------------------------------
rights now or hereafter granted under applicable law or otherwise, and not by
way of limitation of any such rights, upon the occurrence and during the
continuance of an Event of Default, each Bank is hereby authorized at any time
or from time to time, without presentment, demand, protest or other notice of
any kind to Holdings or any of its Subsidiaries or to any other Person, any such
notice being hereby expressly waived, to set off and to appropriate and apply
any and all deposits (general or special) and any other Indebtedness at any time
held or owing by such Bank (including, without limitation, by branches and
agencies of such Bank wherever located) to or for the credit or the account of
Holdings or any of its Subsidiaries against and on account of
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the Obligations of Holdings or any of its Subsidiaries to such Bank under this
Agreement or under any of the other Credit Documents, including, without
limitation, all interests in Obligations of Holdings or any of its Subsidiaries
purchased by such Bank pursuant to Section 12.06(b), and all other claims of any
nature or description arising out of or connected with this Agreement or any
other Credit Document, irrespective of whether or not such Bank shall have made
any demand hereunder and although said Obligations shall be contingent or
unmatured.
(b) NOTWITHSTANDING THE FOREGOING SUBSECTION (a), AT ANY TIME THAT
THE LOANS OR ANY OTHER OBLIGATION SHALL BE SECURED BY REAL PROPERTY LOCATED IN
CALIFORNIA, NO BANK SHALL EXERCISE A RIGHT OF SETOFF, BANKER'S LIEN OR
COUNTERCLAIM OR TAKE ANY COURT OR ADMINISTRATIVE ACTION OR INSTITUTE ANY
PROCEEDING TO ENFORCE ANY PROVISION OF THIS AGREEMENT OR ANY NOTE THAT IS NOT
TAKEN BY THE REQUIRED BANKS OR APPROVED IN WRITING BY THE REQUIRED BANKS IF SUCH
SETOFF OR ACTION OR PROCEEDING WOULD OR MIGHT (PURSUANT TO SECTIONS 580a, 580b,
580d AND 726 OF THE CALIFORNIA CODE OF CIVIL PROCEDURE OR SECTION 2924 OF THE
CALIFORNIA CIVIL CODE, IF APPLICABLE, OR OTHERWISE) AFFECT OR IMPAIR THE
VALIDITY, PRIORITY OR ENFORCEABILITY OF THE LIENS GRANTED TO THE COLLATERAL
AGENT PURSUANT TO THE SECURITY DOCUMENTS OR THE ENFORCEABILITY OF THE NOTES AND
OTHER OBLIGATIONS HEREUNDER, AND ANY ATTEMPTED EXERCISE BY ANY BANK OF ANY SUCH
RIGHT WITHOUT OBTAINING SUCH CONSENT OF THE REQUIRED BANKS SHALL BE NULL AND
VOID. THIS SUBSECTION (b) SHALL BE SOLELY FOR THE BENEFIT OF EACH OF THE BANKS
HEREUNDER.
12.03 Notices. Except as otherwise expressly provided herein, all
-------
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, facsimile or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered, if to any Credit Party,
at the address specified opposite its signature below or in the other relevant
Credit Documents, as the case may be; if to any Bank, at its address specified
for such Bank on Annex II; or, at such other address as shall be designated by
any party in a written notice to the other parties hereto. All such notices and
communications shall be mailed, telegraphed, telexed, telecopied or cabled or
sent by overnight courier, and shall be effective when received.
12.04 Benefit of Agreement. (a) This Agreement shall be binding
--------------------
upon and inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto; provided, however, no Credit Party may assign
-------- -------
or transfer any of its rights, obligations or interest hereunder or under any
other Credit Document without the prior written consent of all of the Banks and,
provided further, that no Bank may assign or transfer all or any portion of its
- ----------------
Revolving Loan Commitment and/or its outstanding Loans except as provided in
Section 12.04(b) and, provided further, that although any Bank may grant
----------------
participations in its rights hereunder in accordance with this Section, such
Bank shall remain a "Bank" for all purposes
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hereunder and the participant shall not constitute a "Bank" hereunder and,
provided further, that no Bank shall grant any participation under which the
- ----------------
participant shall have rights to approve any amendment to or waiver of this
Agreement or any other Credit Document except to the extent such amendment or
waiver would (i) extend the final scheduled maturity of any Loan, Note or Letter
of Credit (unless such Letter of Credit is not extended beyond the Revolving
Loan Maturity Date) in which such participant is participating, or reduce the
rate or extend the time of payment of interest or Fees thereon (except in
connection with a waiver of applicability of any post-default increase in
interest rates) or reduce the principal amount thereof, or increase the amount
of the participant's participation over the amount thereof then in effect (it
being understood that a waiver of any Default or Event of Default or of a
mandatory reduction in the Total Commitment shall not constitute a change in the
terms of such participation, and that an increase in any Commitment or Loan
shall be permitted without the consent of any participant if the participant's
participation is not increased as a result thereof), (ii) consent to the
assignment or transfer by the Borrower of any of its rights and obligations
under this Agreement or (iii) release all or substantially all of the Collateral
under all of the Security Documents (except as expressly provided in the Credit
Documents) supporting the Loans hereunder in which such participant is
participating. In the case of any such participation, the participant shall not
have any rights under this Agreement or any of the other Credit Documents (the
participant's rights against such Bank in respect of such participation to be
those set forth in the agreement executed by such Bank in favor of the
participant relating thereto) and all amounts payable by the Borrower hereunder
shall be determined as if such Bank had not sold such participation.
(b) Notwithstanding the foregoing, any Bank (or any Bank together
with one or more other Banks) may (x) assign all or a portion of its Revolving
Loan Commitment (and related outstanding Obligations hereunder) and/or its
outstanding Term Loans to its parent company and/or any affiliate of such Bank
which is at least 50% owned by such Bank or its parent company or to one or more
Banks or (y) assign all, or if less than all, a portion equal to at least
$5,000,000 in the aggregate for the assigning Bank or assigning Banks, of such
Revolving Loan Commitments and outstanding principal amount of Term Loans
hereunder to one or more Eligible Transferees, each of which assignees shall
become a party to this Agreement as a Bank by execution of an Assignment and
Assumption Agreement, provided that (i) at such time Annex I shall be deemed
--------
modified to reflect the Commitments (and/or outstanding Term Loans, as the case
may be) of such new Bank and of the existing Banks, (ii) upon surrender of the
old Notes, new Notes will be issued, at the Borrower's expense, to such new Bank
and to the assigning Bank, such new Notes to be in conformity with the
requirements of Section 1.05 (with appropriate modifications) to the extent
needed to reflect the revised Commitments (and/or outstanding Term Loans, as the
case may be), (iii) the consent of the Agent shall be required in connection
with any such assignment pursuant to clause (y) of this Section 12.04(b) (which
consent shall not be unreasonably withheld or delayed) and (iv) the Agent shall
receive at the time of each such assignment, from the assigning or assignee
Bank, the payment of a non-refundable assignment fee of $3,500 and, provided
--------
further, that such transfer or assignment will not be effective until recorded
- -------
by the Agent on the Register pursuant to Section 7.13 hereof. To the extent of
any assignment pursuant to this Section 12.04(b), the assigning Bank shall be
relieved of its obligations hereunder with respect to its assigned
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commitments. At the time of each assignment pursuant to this Section 12.04(b) to
a Person which is not already a Bank hereunder and which is not a United States
person (as such term is defined in Section 7701(a)(30) of the Code) for Federal
income tax purposes, the respective assignee Bank shall provide to the Borrower
and the Agent the appropriate Internal Revenue Service Forms (and, if applicable
a Section 4.04(b)(ii) Certificate) described in Section 4.04(b). To the extent
that an assignment of all or any portion of a Bank's Commitments and related
outstanding Obligations pursuant to Section 1.13 or this Section 12.04(b) would,
at the time of such assignment, result in increased costs under Section 1.10 or
1.11 from those being charged by the respective assigning Bank prior to such
assignment, then the Borrower shall not be obligated to pay such increased costs
(although the Borrower shall be obligated to pay any other increased costs of
the type described above resulting from changes after the date of the respective
assignment).
(c) Nothing in this Agreement shall prevent or prohibit any Bank from
pledging its Loans and Notes hereunder to a Federal Reserve Bank in support of
borrowings made by such Bank from such Federal Reserve Bank.
12.05 No Waiver; Remedies Cumulative. No failure or delay on the
------------------------------
part of the Agent or any Bank in exercising any right, power or privilege
hereunder or under any other Credit Document and no course of dealing between
any Credit Party and the Agent or any Bank shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, power or privilege
hereunder or under any other Credit Document preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights and remedies herein expressly provided are
cumulative and not exclusive of any rights or remedies which the Agent or any
Bank would otherwise have. No notice to or demand on any Credit Party in any
case shall entitle any Credit Party to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of the Agent
or the Banks to any other or further action in any circumstances without notice
or demand.
12.06 Payments Pro Rata. (a) The Agent agrees that promptly after
-----------------
its receipt of each payment from or on behalf of any Credit Party in respect of
any Obligations of such Credit Party, it shall, except as otherwise provided in
this Agreement, distribute such payment to the Banks (other than any Bank that
has consented in writing to waive its pro rata share of such payment) pro rata
--- ---- --- ----
based upon their respective shares, if any, of the Obligations with respect to
which such payment was received.
(b) Each of the Banks agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal of, or interest
on, the Loans, Unpaid Drawings or Fees, of a sum which with respect to the
related sum or sums received by other Banks is in a greater proportion than the
total of such Obligation then owed and due to such Bank bears to the total of
such Obligation then owed and due to all
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of the Banks immediately prior to such receipt, then such Bank receiving such
excess payment shall purchase for cash without recourse or warranty from the
other Banks an interest in the Obligations of the respective Credit Party to
such Banks in such amount as shall result in a proportional participation by all
of the Banks in such amount; provided, that if all or any portion of such excess
--------
amount is thereafter recovered from such Bank, such purchase shall be rescinded
and the purchase price restored to the extent of such recovery, but without
interest.
12.07 Calculations; Computations. (a) The financial statements to
--------------------------
be furnished to the Banks pursuant hereto shall be made and prepared in
accordance with GAAP consistently applied throughout the periods involved
(except as set forth in the notes thereto or as otherwise disclosed in writing
by Holdings or the Borrower to the Banks); provided, that except as otherwise
--------
specifically provided herein, all computations determining compliance with
Sections 4.02 and 8, including definitions used therein, shall utilize
accounting principles and policies in effect at the time of the preparation of,
and in conformity with those used to prepare, the December 31, 1995 financial
statements delivered to the Banks pursuant to Section 6.10(b), but shall not
give effect to (i) purchase accounting adjustments required or permitted by APB
16 and its interpretations (including non-cash write-ups and non-cash charges
relating to inventory, fixed assets and in-process research and development, in
each case arising in connection with the Acquisition, the Original Acquisition
or any Permitted Acquisitions) and APB 17 and its interpretations (including
non-cash charges relating to intangibles and goodwill arising in connection with
the Acquisition, the Original Acquisition or any Permitted Acquisitions) and
(ii) those fees paid to Bain Capital and/or Related Parties pursuant to Sections
8.07(ii) and 8.07(v).
(b) All computations of interest and Fees hereunder shall be made on
the actual number of days elapsed over a year of 360 days.
12.08 Governing Law; Submission to Jurisdiction; Venue. (a) THIS
------------------------------------------------
AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK. Any legal action or proceeding
with respect to this Agreement or any other Credit Document may be brought in
the courts of the State of New York or of the United States for the Southern
District of New York, and, by execution and delivery of this Agreement, each
Credit Party hereby irrevocably accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction of the aforesaid
courts. Each Credit Party hereby further irrevocably waives any claim that any
such courts lack jurisdiction over such Credit Party, and agrees not to plead or
claim, in any legal action or proceeding with respect to this Agreement or any
other Credit Document brought in any of the aforesaid courts, that any such
court lacks jurisdiction over such Credit Party. Each Credit Party irrevocably
consents to the service of process in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
such Credit Party, at its address for notices pursuant to Section 12.03, such
service to become effective 30 days after such mailing. Each Credit Party
hereby irrevocably waives any objection to such service
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of process and further irrevocably waives and agrees not to plead or claim in
any action or proceeding commenced hereunder or under any other Credit Document
that service of process was in any way invalid or ineffective. Nothing herein
shall affect the right of the Agent, any Bank or the holder of any Note to serve
process in any other manner permitted by law or to commence legal proceedings or
otherwise proceed against any Credit Party in any other jurisdiction.
(b) Each Credit Party hereby irrevocably waives any objection which
it may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Agreement or
any other Credit Document brought in the courts referred to in clause (a) above
and hereby further irrevocably waives and agrees not to plead or claim in any
such court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum.
12.09 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts executed by all the parties hereto shall be lodged with Holdings,
the Borrower and the Agent.
12.10 Effectiveness. This Agreement shall become effective on the
-------------
date (the "Effective Date") on which Holdings, the Borrower and each of the
Banks shall have signed a counterpart hereof (whether the same or different
counterparts) and shall have delivered the same to the Agent at the Notice
Office or, in the case of the Banks, shall have given to the Agent telephonic
(confirmed in writing), written, telex or facsimile notice (actually received)
at such office that the same has been signed and mailed to it. The Agent will
give Holdings, the Borrower and each Bank prompt written notice of the
occurrence of the Effective Date.
12.11 Headings Descriptive. The headings of the several sections and
--------------------
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
12.12 Amendment or Waiver; etc. (a) Neither this Agreement nor any
-------------------------
other Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the respective Credit Parties party thereto and the
Required Banks, provided that no such change, waiver, discharge or termination
--------
shall, without the consent of each Bank (other than a Defaulting Bank) (with
Obligations being directly affected in the case of following clause (i)), (i)
extend the final scheduled maturity of any Loan or Note or extend the stated
maturity of any Letter of Credit beyond the Revolving Loan Maturity Date, or
reduce the rate or extend the time of payment of interest or Fees thereon, or
reduce the principal amount thereof (it being understood that any amendment or
modification to the financial definitions in this Agreement shall not constitute
a reduction in any rate of interest or fees for the purposes of this clause
(i)), (ii) release all or substantially all of the Collateral (except as
expressly provided in the Security
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<PAGE>
Documents) under all the Security Documents, (iii) amend, modify or waive any
provision of this Section 12.12, (iv) reduce the percentage specified in the
definition of Required Banks (it being understood that, with the consent of the
Required Banks, additional extensions of credit pursuant to this Agreement may
be included in the determination of the Required Banks on substantially the same
basis as the extensions of Term Loans and Revolving Loan Commitments are
included on the Effective Date) or (v) consent to the assignment or transfer by
the Borrower of any of its rights and obligations under this Agreement; provided
--------
further, that no such change, waiver, discharge or termination shall (1)
- -------
increase the Commitments of any Bank over the amount thereof then in effect
without the consent of such Bank (it being understood that waivers or
modifications of conditions precedent, covenants, Defaults or Events of Default
or of a mandatory reduction in the Total Commitment shall not constitute an
increase of the Commitment of any Bank, and that an increase in the available
portion of any Commitment of any Bank shall not constitute an increase in the
Commitment of such Bank), (2) without the consent of BTCo and each other Letter
of Credit Issuer, amend, modify or waive any provision of Section 2 or alter its
rights or obligations with respect to Letters of Credit, (3) without the consent
of BTCo, alter its rights or obligations with respect to Swingline Loans, (4)
without the consent of the Agent, amend, modify or waive any provision of
Section 11 as same applies to the Agent or any other provision as same relates
to the rights or obligations of the Agent, (5) without the consent of the
Collateral Agent, amend, modify or waive any provision relating to the rights or
obligations of the Collateral Agent, (6) without the consent of the Majority
Banks of each Facility which is being allocated a lesser prepayment, repayment
or commitment reduction as a result of the actions described below (or without
the consent of the Majority Banks of each Facility in the case of an amendment
to the definition of Majority Banks), amend the definition of Majority Banks or
alter the required application of any prepayments or repayments (or commitment
reduction), as between the various Facilities pursuant to Section 4.01(a) or
4.02(B)(b) (although the Required Banks may waive, in whole or in part, any such
prepayment, repayment or commitment reduction so long as the application, as
amongst the various Facilities, of any such prepayment, repayment or commitment
reduction which is still required to be made is not altered) or (7) without the
consent of the Supermajority Banks of the respective Facility, amend the
definition of Supermajority Banks or amend downward, waive or reduce any
Scheduled Repayment of such affected Facility.
(b) If, in connection with any proposed change, waiver, discharge or
termination to any of the provisions of this Agreement as contemplated by clause
(a)(i) through (v), inclusive, of the first proviso to Section 12.12(a), the
consent of the Required Banks is obtained but the consent of one or more of such
other Banks whose consent is required is not obtained, then the Borrower shall
have the right, so long as all non-consenting banks whose individual consent is
required are treated as described in either clause (A) or (B) below, to either
(A) replace each such non-consenting Bank or Banks with one or more Replacement
Banks pursuant to Section 1.13 so long as at the time of such replacement, each
such Replacement Bank consents to the proposed change, waiver, discharge or
termination or (B) terminate such non-consenting Bank's Commitments and repay in
full its outstanding Loans, in accordance with Sections 3.02(b) and/or 4.01(b),
provided that, unless the Commitments terminated and Loans repaid pursuant to
- --------
preceding clause (B) are immediately replaced in full at such time through
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the addition of new Banks or the increase of the Commitments and/or outstanding
Loans of existing Banks (who in each case must specifically consent thereto),
then in the case of any action pursuant to preceding clause (B) the Required
Banks (determined before giving effect to the proposed action) shall
specifically consent thereto, provided further, that the Borrower shall not have
----------------
the right to replace a Bank solely as a result of the exercise of such Bank's
rights (and the withholding of any required consent by such Bank) pursuant to
the second proviso to Section 12.12(a).
12.13 Survival. All indemnities set forth herein including, without
--------
limitation, in Section 1.10, 1.11, 2.05, 4.04, 11.07 or 12.01, shall survive the
execution and delivery of this Agreement and the making and repayment of the
Loans.
12.14 Domicile of Loans. Each Bank may transfer and carry its Loans
-----------------
at, to or for the account of any branch office, subsidiary or affiliate of such
Bank; provided, that the Borrower shall not be responsible for costs arising
--------
under Section 1.10, 1.11, 2.05 or 4.04 resulting from any such transfer (other
than a transfer pursuant to Section 1.12) to the extent such costs would not
otherwise be applicable to such Bank in the absence of such transfer.
12.15 Confidentiality. (a) Each of the Banks agrees that it will
---------------
use its best efforts not to disclose without the prior consent of the Borrower
(other than to its employees, auditors, counsel or other professional advisors,
to affiliates or to another Bank if the Bank or such Bank's holding or parent
company in its sole discretion determines that any such party should have access
to such information) any information with respect to Holdings, the Borrower or
any of its Subsidiaries which is furnished pursuant to this Agreement; provided,
--------
that any Bank may disclose any such information (a) as has become generally
available to the public or has become available to such Bank on a non-
confidential basis, (b) as may be required or appropriate in any report,
statement or testimony submitted to any municipal, state or Federal regulatory
body having or claiming to have jurisdiction over such Bank or to the Federal
Reserve Board, the Federal Deposit Insurance Corporation, the NAIC or similar
organizations (whether in the United States or elsewhere) or their successors,
(c) as may be required or appropriate in response to any summons or subpoena or
in connection with any litigation, (d) in order to comply with any law, order,
regulation or ruling applicable to such Bank, and (e) to any prospective
transferee in connection with any contemplated transfer of any of the Notes or
any interest therein by such Bank; provided, that such prospective transferee
--------
agrees to be bound by the provisions of this Section 12.15 to the same extent as
such Bank.
(b) Each of Holdings and the Borrower hereby acknowledges and agrees
that each Bank may share with any of its affiliates any information related to
Holdings or any of its Subsidiaries (including, without limitation, any
nonpublic customer information regarding the creditworthiness of Holdings and
its Subsidiaries, provided that such Persons shall be subject to the provisions
of this Section 12.15 to the same extent as such Bank).
12.16 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT
--------------------
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY
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JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
SECTION 13. Holdings Guaranty.
-----------------
13.01 The Guaranty. In order to induce the Banks to enter into this
------------
Agreement and to extend credit hereunder and in recognition of the direct
benefits to be received by Holdings from the proceeds of the Loans and the
issuance of the Letters of Credit, Holdings hereby agrees with the Banks as
follows: Holdings hereby unconditionally and irrevocably guarantees as primary
obligor and not merely as surety the full and prompt payment when due, whether
upon maturity, acceleration or otherwise, of any and all of the Guaranteed
Obligations of the Borrower to the Guaranteed Creditors. If any or all of the
Guaranteed Obligations of the Borrower to the Guaranteed Creditors becomes due
and payable hereunder, Holdings unconditionally promises to pay such
indebtedness to the Agent and/or the Banks, or order, on demand, together with
any and all expenses which may be incurred by the Agent or the Banks in
collecting any of the Guaranteed Obligations. If claim is ever made upon any
Guaranteed Creditor for repayment or recovery of any amount or amounts received
in payment or on account of any of the Guaranteed Obligations and any of the
aforesaid payees repays all or part of said amount by reason of (i) any
judgment, decree or order of any court or administrative body having
jurisdiction over such payee or any of its property or (ii) any settlement or
compromise of any such claim effected by such payee with any such claimant
(including the Borrower), then and in such event Holdings agrees that any such
judgment, decree, order, settlement or compromise shall be binding upon
Holdings, notwithstanding any revocation of this Guaranty other instrument
evidencing any liability of the Borrower, and Holdings shall be and remain
liable to the aforesaid payees hereunder for the amount so repaid or recovered
to the same extent as if such amount had never originally been received by any
such payee.
13.02 Bankruptcy. Additionally, Holdings unconditionally and
----------
irrevocably guarantees the payment of any and all of the Guaranteed Obligations
of the Borrower to the Guaranteed Creditors whether or not due or payable by the
Borrower upon the occurrence of any of the events specified in Section 9.05, and
unconditionally promises to pay such indebtedness to the Guaranteed Creditors,
or order, on demand, in lawful money of the United States.
13.03 Nature of Liability. The liability of Holdings hereunder is
-------------------
exclusive and independent of any security for or other guaranty of the
Guaranteed Obligations of the Borrower whether executed by Holdings, any other
guarantor or by any other party, and the liability of Holdings hereunder is not
affected or impaired by (a) any direction as to application of payment by the
Borrower or by any other party, or (b) any other continuing or other guaranty,
undertaking or maximum liability of a guarantor or of any other party as to the
Guaranteed Obligations of the Borrower, or (c) any payment on or in reduction of
any such other guaranty or undertaking, or (d) any dissolution, termination or
increase, decrease or change in personnel by the Borrower, or (e) any payment
made to any Guaranteed Creditor on the Guaranteed Obligations which any such
Guaranteed Creditor repays to the Borrower
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pursuant to court order in any bankruptcy, reorganization, arrangement,
moratorium or other debtor relief proceeding, and Holdings waives any right to
the deferral or modification of its obligations hereunder by reason of any such
proceeding.
13.04 Independent Obligation. The obligations of Holdings hereunder
----------------------
are independent of the obligations of any other guarantor, any other party or
the Borrower, and a separate action or actions may be brought and prosecuted
against Holdings whether or not action is brought against any other guarantor,
any other party or the Borrower and whether or not any other guarantor, any
other party or the Borrower be joined in any such action or actions. Holdings
waives, to the full extent permitted by law, the benefit of any statute of
limitations affecting its liability hereunder or the enforcement thereof. Any
payment by the Borrower or other circumstance which operates to toll any statute
of limitations as to the Borrower shall operate to toll the statute of
limitations as to any Guarantor.
13.05 Authorization. Holdings authorizes the Guaranteed Creditors
-------------
without notice or demand (except as shall be required by applicable statute and
cannot be waived), and without affecting or impairing its liability hereunder,
from time to time to:
(a) change the manner, place or terms of payment of, and/or change or
extend the time of payment of, renew, increase, accelerate or alter, any of
the Guaranteed Obligations (including any increase or decrease in the rate
of interest thereon), any security therefor, or any liability incurred
directly or indirectly in respect thereof, and the Guaranty herein made
shall apply to the Guaranteed Obligations as so changed, extended, renewed
or altered;
(b) take and hold security for the payment of the Guaranteed
Obligations and sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever
securing, the Guaranteed Obligations or any liabilities (including any of
those hereunder) incurred directly or indirectly in respect thereof or
hereof, and/or any offset thereagainst;
(c) exercise or refrain from exercising any rights against the
Borrower or others or otherwise act or refrain from acting;
(d) release or substitute any one or more endorsers, guarantors, the
Borrower or other obligors;
(e) settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to the payment of any
liability (whether due or not) of the Borrower to its creditors other than
the Guaranteed Creditors;
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(f) apply any sums by whomsoever paid or howsoever realized to any
liability or liabilities of the Borrower to the Guaranteed Creditors
regardless of what liability or liabilities of Holdings or the Borrower
remain unpaid;
(g) consent to or waive any breach of, or any act, omission or
default under, this Agreement or any of the instruments or agreements
referred to herein, or otherwise amend, modify or supplement this Agreement
or any of such other instruments or agreements; and/or
(h) take any other action which would, under otherwise applicable
principles of common law, give rise to a legal or equitable discharge of
Holdings from its liabilities under this Guaranty.
13.06 Reliance. It is not necessary for any Guaranteed Creditor to
--------
inquire into the capacity or powers of the Borrower or the officers, directors,
partners or agents acting or purporting to act on their behalf, and any
Guaranteed Obligations made or created in reliance upon the professed exercise
of such powers shall be guaranteed hereunder.
13.07 Subordination. Any of the indebtedness of the Borrower
-------------
relating to the Guaranteed Obligations now or hereafter owing to Holdings is
hereby subordinated to the Guaranteed Obligations of the Borrower owing to the
Guaranteed Creditors; and if the Agent so requests at a time when an Event of
Default exists, all such indebtedness relating to the Guaranteed Obligations of
the Borrower to Holdings shall be collected, enforced and received by Holdings
for the benefit of the Guaranteed Creditors and be paid over to the Agent on
behalf of the Guaranteed Creditors on account of the Guaranteed Obligations of
the Borrower to the Guaranteed Creditors, but without affecting or impairing in
any manner the liability of Holdings under the other provisions of this
Guaranty. Prior to the transfer by Holdings of any note or negotiable
instrument evidencing any of the indebtedness relating to the Guaranteed
Obligations of the Borrower to Holdings, Holdings shall mark such note or
negotiable instrument with a legend that the same is subject to this
subordination. Without limiting the generality of the foregoing, Holdings
hereby agrees with the Guaranteed Creditors that it will not exercise any right
of subrogation which it may at any time otherwise have as a result of this
Guaranty (whether contractual, under Section 509 of the Bankruptcy Code or
otherwise) until all Guaranteed Obligations have been irrevocably paid in full
in cash.
13.08 Waiver. (a) Holdings waives any right (except as shall be
------
required by applicable statute and cannot be waived) to require any Guaranteed
Creditor to (i) proceed against the Borrower, any other guarantor or any other
party, (ii) proceed against or exhaust any security held from the Borrower, any
other guarantor or any other party or (iii) pursue any other remedy in any
Guaranteed Creditor's power whatsoever. Holdings waives any defense based on or
arising out of any defense of the Borrower, any other guarantor or any other
party, other than payment in full of the Guaranteed Obligations, based on or
arising out of the disability of the Borrower, any other guarantor or any other
party, or the validity, legality or unenforceability of the Guaranteed
Obligations or any part thereof from any cause, or the
-121-
<PAGE>
cessation from any cause of the liability of the Borrower other than payment in
full of the Guaranteed Obligations. The Guaranteed Creditors may, at their
election, foreclose on any security held by the Agent, the Collateral Agent or
any other Guaranteed Creditor by one or more judicial or nonjudicial sales,
whether or not every aspect of any such sale is commercially reasonable (to the
extent such sale is permitted by applicable law), or exercise any other right or
remedy the Guaranteed Creditors may have against the Borrower or any other
party, or any security, without affecting or impairing in any way the liability
of Holdings hereunder except to the extent the Guaranteed Obligations have been
paid. Holdings waives any defense arising out of any such election by the
Guaranteed Creditors, even though such election operates to impair or extinguish
any right of reimbursement or subrogation or other right or remedy of Holdings
against the Borrower or any other party or any security.
(b) Holdings waives all presentments, demands for performance,
protests and notices, including without limitation notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this Guaranty,
and notices of the existence, creation or incurring of new or additional
Guaranteed Obligations. Holdings assumes all responsibility for being and
keeping itself informed of the Borrower's financial condition and assets, and of
all other circumstances bearing upon the risk of nonpayment of the Guaranteed
Obligations and the nature, scope and extent of the risks which Holdings assumes
and incurs hereunder, and agrees that the Agent and the Banks shall have no duty
to advise Holdings of information known to them regarding such circumstances or
risks.
(c) Holdings hereby acknowledges and affirms that it understands that
to the extent the Guaranteed Obligations are secured by real property located in
the State of California, Holdings shall be liable for the full amount of its
liability hereunder notwithstanding foreclosure on such real property by trustee
sale or any other reason impairing Holdings' or any secured creditor's right to
proceed against the Borrower or any other guarantor of the Guaranteed
Obligations.
(d) Holdings hereby waives, to the fullest extent permitted by
applicable law, all rights and benefits under Sections 580a, 580b, 580d and 726
of the California Code of Civil Procedure. Holdings hereby further waives, to
the fullest extent permitted by applicable law, without limiting the generality
of the foregoing or any other provision hereof, all rights and benefits which
might otherwise be available to Holdings under Sections 2787 through 2855,
inclusive, 2899 and 3433 of the California Civil Code.
(e) Holdings further understands, is aware and hereby acknowledges
that if the Guaranteed Creditors elect to nonjudicially foreclose on any real
property security located in the State of California any right of subrogation of
Holdings against any Credit Party may be impaired or extinguished and that as a
result of such impairment or extinguishment of subrogation rights, Holdings may
have a defense to a deficiency judgment arising out of the operation of Section
580d of the California Code of Civil Procedure and related principles of
estoppel. Holdings waives all rights and defenses arising out of an election of
remedies by the Banks, even though that election of remedies, such as a
nonjudicial foreclosure with respect to security for a guaranteed obligation,
has destroyed the guarantor's rights of subrogation and
-122-
<PAGE>
reimbursement against the principal by the operation of Section 580d of the Code
of Civil Procedure or otherwise.
13.09 Nature of Liability. It is the desire and intent of Holdings
-------------------
and the Secured Creditors that this Guaranty shall be enforced against Holdings
to the fullest extent permissible under the laws and public policies applied in
each jurisdiction in which enforcement is sought. If, however, and to the
extent that, the obligations of Holdings under this Guaranty shall be
adjudicated to be invalid or unenforceable for any reason (including, without
limitation, because of any applicable state or federal law relating to
fraudulent conveyances or transfers), then the amount of the Guaranteed
Obligations of Holdings shall be deemed to be reduced and Holdings shall pay the
maximum amount of the Guaranteed Obligations which would be permissible under
applicable law.
* * *
-123-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
Address:
- -------
333 East Howard Avenue WESLEY-JESSEN HOLDING, INC.
Des Plaines, Illinois 60018-5903
Attention: Chief Financial Officer
Telephone: (847) 294-3868 By /s/ Edward J. Kelley
Telecopier:(847) 294-3058 ----------------------------
Name: Edward J. Kelley
Title: Chief Financial Officer
333 East Howard Avenue WESLEY-JESSEN CORPORATION
Des Plaines, Illinois 60018-5903
Attention: Chief Financial Officer
Telephone: (847) 294-3868 By /s/ Gerald B. Sweeney
Telecopier:(847) 294-3058 ----------------------------
Name: Gerald B. Sweeney
Title: Assistant Secretary
<PAGE>
BANKERS TRUST COMPANY
By Mary Kay Coyle
-------------------------
Name: Mary Kay Coyle
Title:
<PAGE>
FLEET NATIONAL BANK
By Guy Smith
-------------------------
Name: Guy Smith
Title: SVP
<PAGE>
HARRIS TRUST AND SAVINGS BANK
By /s/ Ronald L. Dell'artino
---------------------------
Name: Ronald L. Dell'artino
Title: Vice President
<PAGE>
LASALLE NATIONAL BANK
By Sara K. TenBroek
-------------------------
Name: Sara K. TenBroek
Title: Vice President
<PAGE>
SOCIETE GENERALE
By /s/ John J. Wagner
-------------------------
Name: John J. Wagner
Title: Vice President
<PAGE>
ANNEX I
-------
LIST OF BANKS
-------------
<TABLE>
<CAPTION>
Revolving
A Term B Term Loan Loan
Bank Commitment Commitment Commitment
---- ----------- ----------- -----------
<S> <C> <C> <C>
Bankers Trust Company $10,000,000 $50,000,000 $10,000,000
Fleet National Bank $10,000,000 $ -0- $10,000,000
Harris Trust and Savings
Bank $5,000,000 $ -0- $5,000,000
LaSalle National Bank $10,000,000 $ -0- $10,000,000
Societe Generale $10,000,000 $ -0- $10,000,000
Total: $45,000,000 $50,000,000 $45,000,000
=========== =========== ===========
</TABLE>
<PAGE>
ANNEX II
--------
BANK ADDRESSES
--------------
Bank Address
- ---- -------
Bankers Trust Company One Bankers Trust Plaza
New York, NY 10006
Attention: Mary Kay Coyle
Telephone No.: (212) 250-9094
Facsimile No.: (212) 250-7218
Fleet National Bank 75 State Street
MA BOFO4P
Boston, MA 02109
Attention: Mark Siegel (Amendments)
Telephone No.: (617) 346-1772
Facsimile No.: (617) 346-1569
Attention: Terri DeMarco (Administrative
Matters)
Telephone No.: (617) 346-1675
Facsimile No.: (617) 346-1569
Harris Trust and Savings Bank 111 West Monroe Street, 18W
Chicago, IL 60690
Attention: Ron Dell'Artino
Telephone No.: (312) 461-5113
Facsimile No.: (312) 461-2591
LaSalle National Bank 120 South LaSalle Street
Chicago, IL 60603
Attention: Sara TenBroek
Telephone No.: (312) 904-8448
Facsimile No.: (312) 750-6450
<PAGE>
ANNEX II
Page 2
with a copy to counsel:
Winston & Strawn
35 West Wacker Drive
Chicago, IL 60601
Attention: John MacCarthy
Telephone No.: (312) 558-5876
Facsimile No.: (312) 558-5700
Prime Income Trust Two World Trade Center
72nd Floor
New York, New York 10048
Attention: Rafael Scolari
Telephone No.: (212) 392-5686
Facsimile No.: (212) 392-5345
Societe Generale 1221 Avenue of the Americas
New York, New York 10020
Attention: Ms. Ricky Tretola
Telephone No.: (212) 278-6732
Facsimile No.: (212) 278-6178
<PAGE>
ANNEX III
---------
REAL PROPERTIES
---------------
<PAGE>
ANNEX IV
--------
PROJECTIONS
-----------
<PAGE>
ANNEX V
-------
SUBSIDIARIES
------------
<PAGE>
ANNEX VI
--------
INSURANCE
---------
<PAGE>
ANNEX VII
---------
EXISTING INDEBTEDNESS
---------------------
<PAGE>
ANNEX VIII
----------
EXISTING LIENS
--------------
<TABLE>
<CAPTION>
Filing File Original Description
Location Debtor Secured Party Number File Date of Collateral
- --------- ------ ------------- ------ --------- -------------
<S> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
ANNEX IX
--------
ACQUIRED SUBSIDIARIES
---------------------
<PAGE>
ANNEX X
-------
CAPITALIZATION
--------------
<PAGE>
ANNEX XI
--------
INVESTMENTS
-----------
<PAGE>
ANNEX XII
---------
PROJECTED CONSOLIDATED EBITDA
-----------------------------
<PAGE>
ANNEX XIII
----------
EXCLUDED INTELLECTUAL PROPERTY
------------------------------
<PAGE>
ANNEX XIV
---------
ASSET SALES
-----------
<PAGE>
ANNEX XV
--------
ACQUISITION DOCUMENTS
---------------------
<PAGE>
ANNEX XVI
---------
FINANCIAL STATEMENTS
--------------------
[Following the Initial Borrowing Date, the Borrower may amend the
financial statements referred to in Section 6.10(c) in accordance with
Regulation S-X and GAAP to modify the treatment of returns reserves and to
___________.]
<PAGE>
ANNEX XVII
----------
CONFLICTS
---------
The Management Agreement, dated as of April 5, 1996, by and between
Holdings and Kevin Ryan ("Employee") requires Holdings to repurchase shares of
Holdings common stock upon the death of Employee in an aggregate amount which
would exceed the aggregate amount permitted to be repurchased pursuant to
Section 8.06.
<PAGE>
Exhibit 4.5
===========================================
SECURITY AGREEMENT
among
WESLEY-JESSEN HOLDING, INC.,
WESLEY-JESSEN CORPORATION,
CERTAIN OTHER SUBSIDIARIES
OF WESLEY-JESSEN HOLDING, INC.
and
BANKERS TRUST COMPANY,
as Collateral Agent
Dated as of October 2, 1996
===========================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I SECURITY INTERESTS........................................... 2
1.1. Grant of Security Interests.................................. 2
1.2. Power of Attorney............................................ 3
ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND
COVENANTS.................................................... 3
2.1. Necessary Filings............................................ 3
2.2. No Liens..................................................... 3
2.3. Other Financing Statements................................... 4
2.4. Chief Executive Office; Records.............................. 4
2.5. Location of Inventory and Equipment.......................... 5
2.6. Recourse..................................................... 5
2.7. Trade Names; Change of Name.................................. 5
ARTICLE III SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS.................... 6
3.1. Additional Representations and Warranties.................... 6
3.2. Maintenance of Records....................................... 6
3.3. Direction to Account Debtors; Contracting Parties; etc....... 6
3.4. Modification of Terms; etc................................... 7
3.5. Collection................................................... 7
3.6. Instruments.................................................. 8
3.7. Further Actions.............................................. 8
ARTICLE IV SPECIAL PROVISIONS CONCERNING TRADEMARKS..................... 8
4.1. Additional Representations and Warranties.................... 8
4.2. Licenses and Assignments..................................... 9
4.3. Infringements................................................ 9
4.4. Preservation of Marks........................................ 9
4.5. Maintenance of Registration.................................. 9
4.6. Future Registered Marks...................................... 10
4.7. Remedies..................................................... 10
(i)
<PAGE>
Page
----
ARTICLE V SPECIAL PROVISIONS CONCERNING
PATENTS, COPYRIGHTS AND TRADE SECRETS........................ 11
5.1. Additional Representations and Warranties.................... 11
5.2. Licenses and Assignments..................................... 11
5.3. Infringements................................................ 12
5.4. Maintenance of Patents....................................... 12
5.5. Prosecution of Patent Application............................ 12
5.6. Other Patents and Copyrights................................. 12
5.7. Remedies..................................................... 12
ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL......................... 13
6.1. Protection of Collateral Agent's Security.................... 13
6.2. Warehouse Receipts Non-Negotiable............................ 14
6.3. Further Actions.............................................. 14
6.4. Financing Statements......................................... 14
ARTICLE VII REMEDIES UPON OCCURRENCE OF EVENT
OF DEFAULT................................................... 14
7.1. Remedies; Obtaining the Collateral Upon Default.............. 14
7.2. Remedies; Disposition of the Collateral...................... 16
7.3. Waiver of Claims............................................. 17
7.4. Application of Proceeds...................................... 17
7.5. Remedies Cumulative.......................................... 19
7.6. Discontinuance of Proceedings................................ 19
ARTICLE VIII INDEMNITY.................................................... 20
8.1. Indemnity.................................................... 20
8.2. Indemnity Obligations Secured by Collateral; Survival........ 21
ARTICLE IX DEFINITIONS.................................................. 21
ARTICLE X MISCELLANEOUS................................................ 26
10.1. Notices...................................................... 26
10.2. Waiver; Amendment............................................ 27
10.3. Obligations Absolute......................................... 27
10.4. Successors and Assigns....................................... 27
10.5. Headings Descriptive......................................... 28
10.6. Governing Law................................................ 28
10.7. Assignor's Duties............................................ 28
10.8. Termination; Release......................................... 28
10.9. Counterparts................................................. 29
(ii)
<PAGE>
Page
----
10.10. The Collateral Agent......................................... 29
10.11. Additional Assignors......................................... 29
ANNEX A Schedule of Chief Executive Offices and other Record Locations
ANNEX B Schedule of Inventory and Equipment Locations
ANNEX C Trade and Fictitious Names
ANNEX D List of Marks
ANNEX E List of Patents and Applications
ANNEX F List of Copyrights and Applications
ANNEX G Grant of Security Interest in United States Trademarks and Patents
ANNEX H Grant of Security Interest in United States Copyrights
(iii)
<PAGE>
EXHIBIT G
SECURITY AGREEMENT
------------------
SECURITY AGREEMENT, dated as of October 2, 1996, among each of the
undersigned (each, an "Assignor" and, together with any other entity that
becomes a party hereto pursuant to Section 10.11 hereof, the "Assignors") and
Bankers Trust Company, as Collateral Agent (the "Collateral Agent"), for the
benefit of the Secured Creditors (as defined below). Except as otherwise
defined herein, terms used herein and defined in the Credit Agreement (as
defined below) shall be used herein as therein defined.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Wesley-Jessen Holding, Inc. ("Holdings"), Wesley-Jessen
Corporation (the "Borrower"), the financial institutions from time to time party
thereto (the "Banks"), and Bankers Trust Company, as Agent (the "Agent," and
together with the Collateral Agent and the Banks, the "Bank Creditors"), have
entered into a Credit Agreement, dated as of October 2, 1996 (as amended,
modified or supplemented from time to time, the "Credit Agreement"), providing
for the making of Loans to the Borrower and the issuance of, and participation
in, Letters of Credit for the account of the Borrower, all as contemplated
therein;
WHEREAS, the Borrower may from time to time be party to one or more
(i) interest rate agreements, interest rate cap agreements, interest rate collar
agreements or other similar agreements or arrangements, (ii) foreign exchange
contracts, currency swap agreements or similar agreements or arrangements
designed to protect against the fluctuations in currency values and/or (iii)
other types of hedging agreements from time to time (each such agreement or
arrangement with an Other Creditor (as hereinafter defined), an "Interest Rate
Protection Agreement or Other Hedging Agreement"), with a Bank or an affiliate
of a Bank (each such Bank or affiliate, even if the respective Bank subsequently
ceases to be a Bank under the Credit Agreement for any reason, together with
such Bank's or affiliate's successors and assigns, collectively, the "Other
Creditors", and together with the Bank Creditors, the "Secured Creditors");
WHEREAS, pursuant to the Holdings Guaranty, Holdings has guaranteed to
the Secured Creditors the payment when due of all obligations and liabilities of
the Borrower under or with respect to the Credit Documents and the Interest Rate
Protection Agreements or Other Hedging Agreements;
<PAGE>
EXHIBIT G
Page 2
WHEREAS, pursuant to the Subsidiary Guaranty, each Assignor (other
than Holdings and the Borrower) has jointly and severally guaranteed to the
Secured Creditors the payment when due of all obligations and liabilities of the
Borrower under or with respect to the Credit Documents and the Interest Rate
Protection Agreements or Other Hedging Agreements;
WHEREAS, it is a condition precedent to the making of Loans to the
Borrower under the Credit Agreement that the Assignors shall have executed and
delivered to the Collateral Agent this Agreement; and
WHEREAS, each Assignor desires to execute this Agreement to satisfy
the conditions described in the preceding paragraph;
NOW, THEREFORE, in consideration of the benefits accruing to each
Assignor, the receipt and sufficiency of which are hereby acknowledged, each
Assignor hereby makes the following representations and warranties to the
Collateral Agent and hereby covenants and agrees with the Collateral Agent as
follows:
ARTICLE I
SECURITY INTERESTS
1.1. Grant of Security Interests. (a) As security for the prompt
---------------------------
and complete payment and performance when due of all of its Obligations, each
Assignor does hereby assign and transfer unto the Collateral Agent, and does
hereby pledge and grant to the Collateral Agent for the benefit of the Secured
Creditors, a continuing security interest of first priority in, all of the
right, title and interest of such Assignor in, to and under all of the
following, whether now existing or hereafter from time to time acquired: (i)
each and every Receivable, (ii) all Contracts, together with all Contract Rights
arising thereunder (other than Contracts which by their terms cannot be
pledged), (iii) all Inventory, (iv) all Equipment, (v) all Marks, together with
the registrations and right to all renewals thereof, and the goodwill of the
business of such Assignor symbolized by the Marks, (vi) all Patents and
Copyrights, (vii) all computer programs of such Assignor and all intellectual
property rights therein and all other proprietary information of such Assignor,
including, but not limited to, trade secrets, (viii) all other Goods, General
Intangibles, Chattel Paper, Documents and Instruments, (ix) the Cash Collateral
Account and all monies, securities and instruments deposited or required to be
deposited in such Cash Collateral Account, and (x) all Proceeds and products of
any and all of the foregoing (all of the above, collectively, the "Collateral").
-2-
<PAGE>
EXHIBIT G
Page 3
(b) The security interest of the Collateral Agent under this
Agreement extends to all Collateral of the kind which is the subject of this
Agreement which any Assignor may acquire at any time during the continuation of
this Agreement.
1.2. Power of Attorney. Each Assignor hereby constitutes and
-----------------
appoints the Collateral Agent its true and lawful attorney, irrevocably, with
full power after the occurrence of and during the continuance of an Event of
Default (in the name of such Assignor or otherwise) to act, require, demand,
receive, compound and give acquittance for any and all monies and claims for
monies due or to become due to such Assignor under or arising out of the
Collateral, to endorse any checks or other instruments or orders in connection
therewith and to file any claims or take any action or institute any proceedings
which the Collateral Agent may deem to be reasonably necessary or advisable to
protect the interests of the Secured Creditors, which appointment as attorney is
coupled with an interest.
ARTICLE II
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Each Assignor represents, warrants and covenants, which
representations, warranties and covenants shall survive execution and delivery
of this Agreement, as follows:
2.1. Necessary Filings. All filings, registrations and recordings
-----------------
necessary or appropriate to create, preserve and perfect the security interest
granted by such Assignor to the Collateral Agent hereby in respect of the
Collateral have been accomplished (or will have been accomplished on the
Business Day immediately following the Initial Borrowing Date) and the security
interest granted to the Collateral Agent pursuant to this Agreement in and to
the Collateral creates a perfected security interest therein prior to the rights
of all other Persons therein and subject to no other Liens (other than Permitted
Liens) and is entitled to all the rights, priorities and benefits afforded by
the Uniform Commercial Code or other relevant law as enacted in any relevant
jurisdiction to perfected security interests, in each case to the extent that
the Collateral consists of the type of property in which a security interest may
be perfected by filing a financing statement under the Uniform Commercial Code
as enacted in any relevant jurisdiction or in the United States Patent and
Trademark Office or United States Copyright Office.
2.2. No Liens. Such Assignor is, and as to Collateral acquired by it
--------
from time to time after the date hereof such Assignor will be, the owner of, or
has rights in, all Collateral free from any Lien, security interest, encumbrance
or other right, title or interest of any Person (other than Permitted Liens),
and such Assignor shall defend the Collateral to the extent of its
-3-
<PAGE>
EXHIBIT G
Page 4
rights therein against all claims and demands of all Persons at any time
claiming the same or any interest therein adverse to the Collateral Agent.
2.3. Other Financing Statements. As of the date hereof, there is no
--------------------------
financing statement (or similar statement or instrument of registration under
the law of any jurisdiction) covering or purporting to cover any interest of any
kind in the Collateral (other than financing statements filed in respect of
Permitted Liens), and so long as the Total Commitment has not been terminated or
any Note remains unpaid or any of the Obligations remain unpaid or any Interest
Rate Protection Agreement or Other Hedging Agreement or Letter of Credit remains
in effect (other than Letters of Credit, together with all Fees that have
accrued and will accrue thereon through the stated termination date of such
Letters of Credit, which have been supported in a manner satisfactory to the
Letter of Credit issuer in its sole and absolute discretion) or any Obligations
are owed with respect thereto, such Assignor will not execute or authorize to be
filed in any public office any financing statement (or similar statement or
instrument of registration under the law of any jurisdiction) or statements
relating to the Collateral, except (a) financing statements filed or to be filed
in respect of and covering the security interests granted hereby by such
Assignor or as permitted by the Credit Agreement and (b) financing statements
with respect to Permitted Liens.
2.4. Chief Executive Office; Records. The chief executive office of
-------------------------------
such Assignor is located at the address or addresses indicated on Annex A hereto
for such Assignor. Such Assignor will not move its chief executive office except
to such new location as such Assignor may establish in accordance with the last
sentence of this Section 2.4. The originals of all documents evidencing all
Receivables and Contract Rights of such Assignor and the only original books of
account and records of such Assignor relating thereto are, and will continue to
be, kept at such chief executive office, at one or more of the locations set
forth on Annex A hereto or at such new locations as such Assignor may establish
in accordance with the last sentence of this Section 2.4. All Receivables and
Contract Rights of such Assignor are, and will continue to be, maintained at,
and controlled and directed (including, without limitation, for general
accounting purposes) from, the office locations described above or such new
location established in accordance with the last sentence of this Section 2.4.
No Assignor shall establish new locations for such offices until it shall have
given to the Collateral Agent notice of its intention to do so unless (i) such
Assignor shall give to the Collateral Agent written notice of any such
relocation of its chief executive office within 10 days following such
relocation, clearly describing such new location and providing such other
information in connection therewith as the Collateral Agent may reasonably
request and (ii) with respect to such new location, it shall take all action,
reasonably satisfactory to the Collateral Agent, to maintain the security
interest of the Collateral Agent in the Collateral intended to be granted hereby
at all times fully perfected and in full force and effect.
-4-
<PAGE>
EXHIBIT G
Page 5
2.5. Location of Inventory and Equipment. All Inventory and
-----------------------------------
Equipment held on the date hereof by each Assignor is located at one of the
locations shown on Annex B hereto for such Assignor (other than (i) immaterial
portions of Inventory (x) sold on consignment or held on display for
demonstration purposes or (y) transferred to another location in connection with
a sale of such Inventory in the ordinary course of business, so long as such
sale occurs within 60 days from the date of such transfer, (ii) various spare
parts held for maintenance or repair of Equipment), (iii) samples to doctors and
customers or (iv) fitting kits and lens vision machines placed with doctors.
Each Assignor agrees that all Inventory and Equipment now held or subsequently
acquired by it shall be kept at (or shall be in transport to) any one of the
locations shown on Annex B hereto, or such new location as such Assignor may
establish in accordance with the last sentence of this Section 2.5 (other than
(i) immaterial portions of Inventory (x) sold on consignment or held on display
for demonstration purposes or (y) may be transferred to another location in
connection with a sale of such Inventory in the ordinary course of business, so
long as such sale occurs within 30 days from the date of such transfer, (ii)
various spare parts held for maintenance or repair of Equipment), (iii) samples
to doctors and customers or (iv) fitting kits and lens vision machines placed
with doctors. Any Assignor may establish a new location for Inventory and
Equipment only if (i) it shall have given to the Collateral Agent written notice
within 10 days following any such relocation clearly describing such new
location and providing such other information in connection therewith as the
Collateral Agent may request and (ii) with respect to such new location, it
shall have taken all action reasonably satisfactory to the Collateral Agent to
maintain the security interest of the Collateral Agent in the Collateral
intended to be granted hereby at all times fully perfected and in full force and
effect.
2.6. Recourse. This Agreement is made with full recourse to each
--------
Assignor and pursuant to and upon all the warranties, representations, covenants
and agreements on the part of such Assignor contained herein, in the other
Credit Documents, in the Interest Rate Protection Agreements or Other Hedging
Agreements and otherwise in writing in connection herewith or therewith.
2.7. Trade Names; Change of Name. No Assignor has or operates in any
---------------------------
jurisdiction under, or in the preceding 12 months has had or has operated in any
jurisdiction under, any trade names, fictitious names or other names except its
legal name and such other trade or fictitious names as are listed on Annex C
hereto. No Assignor shall change its legal name or assume or operate in any
jurisdiction under any trade, fictitious or other name except those names listed
on Annex C hereto and new names established in accordance with the last sentence
of this Section 2.7. No Assignor shall assume or operate in any jurisdiction
under any new trade, fictitious or other name unless (i) it shall have given to
the Collateral Agent written notice within 10 days following any assumption of,
or operation under, such new name clearly describing such new name and the
jurisdictions in which such new name shall be used and providing such other
information in connection therewith as the Collateral Agent may
-5-
<PAGE>
EXHIBIT G
Page 6
reasonably request and (ii) with respect to such new name, it shall have taken
all action requested by the Collateral Agent, to maintain the security interest
of the Collateral Agent in the Collateral intended to be granted hereby at all
times fully perfected and in full force and effect.
ARTICLE III
SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS
3.1. Additional Representations and Warranties. As of the time when
-----------------------------------------
each of its Receivables arises, each Assignor shall be deemed to have
represented and warranted that such Receivable, and all records, papers and
documents relating thereto (if any) are what they purport to be, and that all
papers and documents (if any) relating thereto will be the only original
writings evidencing and embodying such obligation of the account debtor named
therein (other than copies created for general accounting purposes).
3.2. Maintenance of Records. Each Assignor will keep and maintain at
----------------------
its own cost and expense accurate records of its Receivables and Contracts,
records of all payments received, all credits granted thereon, all merchandise
returned and all other dealings therewith, and such Assignor will make the same
available on such Assignor's premises to the Collateral Agent for inspection, at
such Assignor's own cost and expense, at any and all reasonable times upon prior
notice to an Authorized Officer of such Assignor. Upon the occurrence and
during the continuance of an Event of Default and at the request of the
Collateral Agent, such Assignor shall, at its own cost and expense, deliver all
tangible evidence of its Receivables and Contract Rights (including, without
limitation, all documents evidencing the Receivables and all Contracts) and such
books and records to the Collateral Agent or to its representatives (copies of
which evidence and books and records may be retained by such Assignor). Upon
the occurrence and during the continuance of an Event of Default and if the
Collateral Agent so directs, such Assignor shall legend, in form and manner
reasonably satisfactory to the Collateral Agent, the Receivables and the
Contracts, as well as books, records and documents (if any) of such Assignor
evidencing or pertaining to such Receivables and Contracts with an appropriate
reference to the fact that such Receivables and Contracts have been assigned to
the Collateral Agent and that the Collateral Agent has a security interest
therein.
3.3. Direction to Account Debtors; Contracting Parties; etc. Upon
-------------------------------------------------------
the occurrence and during the continuance of an Event of Default, and if the
Collateral Agent so directs any Assignor, such Assignor agrees (x) to cause all
payments on account of the Receivables and Contracts to be made directly to the
Cash Collateral Account, (y) that the Collateral Agent may, at its option,
directly notify the obligors with respect to any Receivables
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EXHIBIT G
Page 7
and/or under any Contracts to make payments with respect thereto as provided in
the preceding clause (x) and (z) that the Collateral Agent may enforce
collection of any such Receivables and Contracts and may adjust, settle or
compromise the amount of payment thereof, in the same manner and to the same
extent as such Assignor. Without notice to or assent by any Assignor, the
Collateral Agent may apply any or all amounts then in, or thereafter deposited
in, the Cash Collateral Account which application shall be effected in the
manner provided in Section 7.4 of this Agreement. The costs and expenses
(including reasonable attorneys' fees) of collection, whether incurred by the
Assignor or the Collateral Agent, shall be borne by the relevant Assignor. The
Collateral Agent shall deliver a copy of each notice referred to in the
preceding clause (y) to the relevant Assignor; provided, that the failure by the
--------
Collateral Agent to so notify such Assignor shall not affect the effectiveness
of such notice or the other rights of the Collateral Agent created by this
Section 3.3.
3.4. Modification of Terms; etc. No Assignor shall rescind or cancel
---------------------------
any indebtedness evidenced by any Receivable or under any Contract, or modify in
any material respect any term thereof or make any material adjustment with
respect thereto, or extend or renew the same, or compromise or settle any
material dispute, claim, suit or legal proceeding relating thereto, or sell any
Receivable or Contract, or interest therein, without the prior written consent
of the Collateral Agent, except as permitted by Section 3.5 hereof or in the
Credit Agreement. Each Assignor will duly fulfill all obligations on its part
to be fulfilled under or in connection with the Receivables and Contracts and
will do nothing to impair the rights of the Collateral Agent in the Receivables
or Contracts.
3.5. Collection. Each Assignor shall endeavor in accordance with
----------
reasonable business practices to cause to be collected from the account debtor
named in each of its Receivables or obligor under any Contract, as and when due
(including, without limitation, amounts which are delinquent, such amounts to be
collected in accordance with generally accepted lawful collection procedures)
any and all amounts owing under or on account of such Receivable or Contract,
and apply forthwith upon receipt thereof all such amounts as are so collected to
the outstanding balance of such Receivable or under such Contract, except that,
prior to the occurrence of an Event of Default, any Assignor may allow in the
ordinary course of business as adjustments to amounts owing under its
Receivables and Contracts (i) an extension or renewal of the time or times of
payment, or settlement for less than the total unpaid balance, which such
Assignor finds appropriate in accordance with reasonable business judgment and
(ii) a refund or credit due as a result of returned or damaged merchandise or
improperly performed services or for other reasons which such Assignor finds
appropriate in accordance with reasonable business judgment. The reasonable
costs and expenses (including, without limitation, attorneys' fees) of
collection, whether incurred by an Assignor or the Collateral Agent, shall be
borne by the relevant Assignor.
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3.6. Instruments. If any Assignor owns or acquires any Instrument
-----------
constituting Collateral, such Assignor will within 10 Business Days notify the
Collateral Agent thereof, and upon request by the Collateral Agent will promptly
deliver such Instrument to the Collateral Agent appropriately endorsed to the
order of the Collateral Agent as further security hereunder.
3.7. Further Actions. Each Assignor will, at its own expense, make,
---------------
execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from
time to time such vouchers, invoices, schedules, confirmatory assignments,
conveyances, financing statements, transfer endorsements, powers of attorney,
certificates, reports and other assurances or instruments and take such further
steps relating to its Receivables, Contracts, Instruments and other property or
rights covered by the security interest hereby granted, as the Collateral Agent
may reasonably require.
ARTICLE IV
SPECIAL PROVISIONS CONCERNING TRADEMARKS
4.1. Additional Representations and Warranties. Each Assignor
-----------------------------------------
represents and warrants that it is the true and lawful owner of or otherwise has
the right to use the registered Marks listed in Annex D hereto for such Assignor
and that said listed Marks constitute all the United States marks and
applications for United States marks registered in the United States Patent and
Trademark Office that such Assignor presently owns or uses in connection with
its business. Each Assignor represents and warrants that it owns, is licensed
to use or otherwise has the right to use all Marks that it uses. Each Assignor
further warrants that it has no knowledge of any third party claim that any
aspect of such Assignor's present or contemplated business operations infringes
or will infringe any trademark, service mark or trade name. Each Assignor
represents and warrants that it is the true and lawful owner of or otherwise has
the right to use all U.S. trademark registrations and applications listed in
Annex D hereto and that said registrations are valid, subsisting, have not been
cancelled and that such Assignor is not aware of any third-party claim that any
of said registrations is invalid or unenforceable, or is not aware that there is
any reason that any of said registrations is invalid or unenforceable, or is not
aware that there is any reason that any of said applications will not pass to
registration. Each Assignor represents and warrants that upon the recordation of
a Grant of Security Interest in United States Trademarks and Patents in the form
of Annex G hereto in the United States Patent and Trademark Office, together
with filings on Form UCC-1 pursuant to this Agreement, all filings,
registrations and recordings necessary or appropriate to perfect the security
interest granted to the Collateral Agent in the United States Marks covered by
this Agreement under federal law will have been accomplished. Each Assignor
agrees to execute such a Grant of Security Interest in United States Trademark
and Patents covering all right, title and interest in each United States Mark,
and the associated goodwill, of such Assignor, and to
-8-
<PAGE>
EXHIBIT G
Page 9
record the same. Each Assignor hereby grants to the Collateral Agent an absolute
power of attorney to sign, upon the occurrence and during the continuance of an
Event of Default, any document which may be required by the United States Patent
and Trademark Office in order to effect an absolute assignment of all right,
title and interest in each Mark, and record the same.
4.2. Licenses and Assignments. Except as otherwise permitted by the
------------------------
Credit Agreement or this Agreement, each Assignor hereby agrees not to divest
itself of any right under any Mark absent prior written approval of the
Collateral Agent.
4.3. Infringements. Each Assignor agrees, promptly upon learning
-------------
thereof, to notify the Collateral Agent in writing of the name and address of,
and to furnish such pertinent information that may be available with respect to,
any party who such Assignor believes is infringing or diluting or otherwise
violating in any material respect any of such Assignor's rights in and to any
Mark, or with respect to any party claiming that such Assignor's use of any Mark
violates in any material respect any property right of that party. Each
Assignor further agrees, unless otherwise agreed by the Collateral Agent, to
prosecute any Person infringing any Mark in accordance with commercially
reasonable business practices.
4.4. Preservation of Marks. Each Assignor agrees to use its Marks in
---------------------
interstate commerce during the time in which this Agreement is in effect,
sufficiently to preserve such Marks as trademarks or service marks under the
laws of the United States; provided, that, to the extent permitted by the Credit
--------
Agreement, no Assignor shall be obligated to preserve any Mark in the event such
Assignor determines, in its reasonable business judgment, that the preservation
of such Mark is no longer desirable in the conduct of its business.
4.5. Maintenance of Registration. Each Assignor shall, at its own
---------------------------
expense, diligently process all documents required by the Trademark Act of 1946,
15 U.S.C. (S)(S) 1051 et seq. to maintain trademark registrations, including but
-- ----
not limited to affidavits of use and applications for renewals of registration
in the United States Patent and Trademark Office for all of its registered Marks
pursuant to 15 U.S.C. (S)(S) 1058(a), 1059 and 1065, and shall pay all fees and
disbursements in connection therewith and shall not abandon any such filing of
affidavit of use or any such application of renewal prior to the exhaustion of
all administrative and judicial remedies without prior written consent of the
Collateral Agent; provided, that no Assignor shall be obligated to maintain
--------
registration of any Mark in the event that such Assignor determines, in its
reasonable business judgment, that such maintenance of such Mark is no longer
necessary or desirable in the conduct of its business. Each Assignor agrees to
notify the Collateral Agent three (3) months prior to the dates on which the
affidavits of use or the
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EXHIBIT G
Page 10
applications for renewal registration are due with respect to any registered
Mark that the affidavits of use or the renewal is being processed or being
abandoned, as the case may be.
4.6. Future Registered Marks. If any Mark registration issues
-----------------------
hereafter to any Assignor as a result of any application now or hereafter
pending before the United States Patent and Trademark Office, within 30 days of
receipt of such certificate, such Assignor shall deliver to the Collateral Agent
a copy of such certificate, and a grant of security in such Mark, to the
Collateral Agent and at the expense of such Assignor, confirming the grant of
security in such Mark to the Collateral Agent hereunder, the form of such
security to be substantially the same as the form hereof or in such other form
as may be reasonably satisfactory to the Collateral Agent.
4.7. Remedies. If an Event of Default shall occur and be continuing,
--------
the Collateral Agent may, by written notice to the relevant Assignor, take any
or all of the following actions: (i) declare the entire right, title and
interest of such Assignor in and to each of the Marks, together with all
trademark rights and rights of protection to the same, vested in the Collateral
Agent for the benefit of the Secured Creditors, in which event such rights,
title and interest shall immediately vest, in the Collateral Agent for the
benefit of the Secured Creditors, and the Collateral Agent shall be entitled to
exercise the power of attorney referred to in Section 4.1 hereof to execute,
cause to be acknowledged and notarized and record said absolute assignment with
the applicable agency; (ii) take and use or sell the Marks and the goodwill of
such Assignor's business symbolized by the Marks and the right to carry on the
business and use the assets of such Assignor in connection with which the Marks
have been used; and (iii) direct such Assignor to refrain, in which event such
Assignor shall refrain, from using the Marks in any manner whatsoever, directly
or indirectly, and, if requested by the Collateral Agent, change such Assignor's
corporate name to eliminate therefrom any use of any Mark and execute such other
and further documents that the Collateral Agent may request to further confirm
this and to transfer ownership of the Marks and registrations and any pending
trademark application in the United States Patent and Trademark Office to the
Collateral Agent.
ARTICLE V
SPECIAL PROVISIONS CONCERNING
PATENTS, COPYRIGHTS AND TRADE SECRETS
5.1. Additional Representations and Warranties. Each Assignor
-----------------------------------------
represents and warrants that it is the true and lawful owner of or otherwise has
the right to use (i) all material United States trade secrets and proprietary
information necessary to operate the business of the Assignor (the "Trade Secret
Rights"), (ii) the Patents listed in Annex E hereto for such
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EXHIBIT G
Page 11
Assignor and that said Patents constitute all the United States patents and
applications for United States patents that such Assignor now owns or uses and
(iii) the Copyrights listed in Annex F hereto for such Assignor and that said
Copyrights all registrations of United States copyrights and applications for
United States include copyright registrations that such Assignor now owns or
uses. Each Assignor further warrants that it has no knowledge of any third party
claim that any aspect of such Assignor's present or contemplated business
operations infringes or will infringe any patent or any copyright of such
Assignor has misappropriated any trade secret or proprietary information, except
those claims which in the aggregate could not be reasonably expected to have a
Material Adverse Effect. Each Assignor represents and warrants that upon the
recordation of a Grant of Security Interest in United States Trademarks and
Patents in the form of Annex G hereto in the United States Patent and Trademark
Office and the recordation of a Grant of Security Interest in United States
Copyrights in the form of Annex H hereto in the United States Copyright Office,
together with filings on Form UCC-1 pursuant to this Agreement, all filings,
registrations and recordings necessary or appropriate to perfect the security
interest granted to the Collateral Agent in the United States Patents and United
States Copyrights covered by this Agreement under federal law will have been
accomplished. Each Assignor agrees to execute such a Grant of Security Interest
in United States Trademarks and Patents covering all right, title and interest
in each United States Patent of such Assignor and to record the same, and to
execute such a Grant of Security Interest in United States Copyrights covering
all right, title and interest in each United States Copyright of such Assignor
and to record the same. Each Assignor hereby grants to the Collateral Agent an
absolute power of attorney to sign, upon the occurrence and during the
continuance of any Event of Default, any document which may be required by the
United States Patent and Trademark Office or the United States Copyright Office
in order to effect an absolute assignment of all right, title and interest in
each Patent and Copyright, and to record the same.
5.2. Licenses and Assignments. Except as otherwise permitted by the
------------------------
Credit Agreement or this Agreement, each Assignor hereby agrees not to divest
itself of any right under any Patent or Copyright absent prior written approval
of the Collateral Agent.
5.3. Infringements. Each Assignor agrees, promptly upon learning
-------------
thereof, to furnish the Collateral Agent in writing with all pertinent
information available to such Assignor with respect to any infringement,
contributing infringement or active inducement to infringe any of such
Assignor's rights in and to in any Patent or Copyright or to any claim that such
Assignor's practice of any Patent or use of any Copyright violates any property
right of a third party, or with respect to any misappropriation of any Trade
Secret Right or any claim that such Assignor's practice of any Trade Secret
Right violates any property right of a third party. Each Assignor further
agrees, absent direction of the Collateral Agent to the contrary, diligently to
prosecute any Person infringing any Patent or Copyright or any Person
misappropriating any Trade Secret Right in accordance with commercially
reasonable business practices.
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5.4. Maintenance of Patents. At its own expense, each Assignor shall
----------------------
make timely payment of all post-issuance fees required pursuant to 35 U.S.C. (S)
41 to maintain in force rights under each Patent, absent prior written consent
of the Collateral Agent; provided, that, to the extent permitted by the Credit
--------
Agreement, no Assignor shall be obligated to maintain any Patent in the event
such Assignor determines, in its reasonable business judgment, that the
maintenance of such Patent is no longer necessary or desirable in the conduct of
its business.
5.5. Prosecution of Patent Application. At its own expense, each
---------------------------------
Assignor shall diligently prosecute all applications for United States Patents
listed in Annex E hereto for such Assignor and shall not abandon any such
application prior to exhaustion of all administrative and judicial remedies,
absent written consent of the Collateral Agent; provided, that, to the extent
--------
permitted by the Credit Agreement, no Assignor shall be obligated to prosecute
any application in the event such Assignor determines, in its reasonable
business judgment, that the prosecuting of such application is no longer
necessary or desirable in the conduct of its business.
5.6. Other Patents and Copyrights. Within 30 days of the acquisition
----------------------------
or issuance of a United States Patent, registration of a Copyright, or
acquisition of a registered Copyright, or of filing of an application for a
United States Patent or registration of Copyright, the relevant Assignor shall
deliver to the Collateral Agent a copy of said Copyright or certificate or
registration of, or application therefor, said Patents, as the case may be, with
an assignment for security as to such Patent or Copyright, as the case may be,
to the Collateral Agent and at the expense of such Assignor, confirming the
assignment for security, the form of such assignment for security to be
substantially the same as the form hereof or in such other form as may be
reasonably satisfactory to the Collateral Agent.
5.7. Remedies. If an Event of Default shall occur and be continuing,
--------
the Collateral Agent may by written notice to the relevant Assignor, take any or
all of the following actions: (i) declare the entire right, title, and interest
of such Assignor in each of the Patents and Copyrights vested in the Collateral
Agent for the benefit of the Secured Creditors, in which event such right,
title, and interest shall immediately vest in the Collateral Agent for the
benefit of the Secured Creditors, in which case the Collateral Agent shall be
entitled to exercise the power of attorney referred to in Section 5.1 hereof to
execute, cause to be acknowledged and notarized and to record said absolute
assignment with the applicable agency; (ii) take and practice or sell the
Patents and Copyrights; and (iii) direct such Assignor to refrain, in which
event such Assignor shall refrain, from practicing the Patents and using the
Copyrights directly or indirectly, and such Assignor shall execute such other
and further documents as the Collateral Agent may request further to confirm
this and to transfer ownership of the Patents and Copyrights to the Collateral
Agent for the benefit of the Secured Creditors.
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Page 13
ARTICLE VI
PROVISIONS CONCERNING ALL COLLATERAL
6.1. Protection of Collateral Agent's Security. Each Assignor will
-----------------------------------------
do nothing to impair the rights of the Collateral Agent in the Collateral except
to the extent such impairment shall be waived in accordance with the terms of
Section 10.2 hereof. Each Assignor will at all times keep its Inventory and
Equipment insured in favor of the Collateral Agent, at such Assignor's own
expense to the extent and in the manner provided in the Credit Agreement; all
policies or certificates with respect to such insurance (and any other insurance
maintained by such Assignor) (i) shall be endorsed to the Collateral Agent's
reasonable satisfaction for the benefit of the Collateral Agent (including,
without limitation, by naming the Collateral Agent as additional insured and
loss payee) and (ii) shall state that such insurance policies shall not be
cancelled or revised without 30 days' prior written notice thereof by the
insurer to the Collateral Agent; and certified copies of such policies or
certificates shall be deposited with the Collateral Agent. If any Assignor
shall fail to insure its Inventory and Equipment in accordance with the
preceding sentence, or if any Assignor shall fail to so endorse and deposit all
policies or certificates with respect thereto, the Collateral Agent shall have
the right (but shall be under no obligation) to procure such insurance and such
Assignor agrees to promptly reimburse the Collateral Agent for all costs and
expenses of procuring such insurance. Except as otherwise permitted to be
retained by the relevant Assignor pursuant to the Credit Agreement, the
Collateral Agent shall, at the time such proceeds of such insurance are
distributed to the Secured Creditors, apply such proceeds in accordance with
Section 7.4 hereof. Each Assignor assumes all liability and responsibility in
connection with the Collateral acquired by it and the liability of such
Assignor to pay the Obligations shall in no way be affected or diminished by
reason of the fact that such Collateral may be lost, destroyed, stolen, damaged
or for any reason whatsoever unavailable to such Assignor.
6.2. Warehouse Receipts Non-Negotiable. Each Assignor agrees that if
---------------------------------
any warehouse receipt or receipt in the nature of a warehouse receipt is issued
with respect to any of its Inventory, such warehouse receipt or receipt in the
nature thereof shall not be "negotiable" (as such term is used in Section 7-104
of the Uniform Commercial Code as in effect in any relevant jurisdiction or
under other relevant law) or, if any warehouse receipt or any receipt in the
nature of a warehouse receipt is "negotiable" (as such term is used in Section
7.04 of the Uniform Commercial Code as in effect in any relevant jurisdiction or
under other relevant law) then the respective Assignor shall promptly take all
action as may be required under the relevant jurisdiction to grant a perfected
security interest in such Collateral to the Collateral Agent for the benefit of
the Secured Creditors.
6.3. Further Actions. Each Assignor will, at its own expense, make,
---------------
execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from
time to time such lists,
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Page 14
descriptions and designations of its Collateral, warehouse receipts, receipts in
the nature of warehouse receipts, bills of lading, documents of title, vouchers,
invoices, schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, reports and
other assurances or instruments and take such further steps relating to the
Collateral and other property or rights covered by the security interest hereby
granted, which the Collateral Agent deems reasonably appropriate or advisable to
perfect, preserve or protect its security interest in the Collateral.
6.4. Financing Statements. Each Assignor agrees to execute and
--------------------
deliver to the Collateral Agent such financing statements, in form reasonably
acceptable to the Collateral Agent, as the Collateral Agent may from time to
time reasonably request or as are necessary or desirable in the opinion of the
Collateral Agent to establish and maintain a valid, enforceable, first priority
perfected security interest in the Collateral as provided herein and the other
rights and security contemplated hereby all in accordance with the Uniform
Commercial Code as enacted in any and all relevant jurisdictions or any other
relevant law. Each Assignor will pay any applicable filing fees, recordation
taxes and related expenses relating to its Collateral. Each Assignor hereby
authorizes the Collateral Agent to file any such financing statements without
the signature of such Assignor where permitted by law.
ARTICLE VII
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
7.1. Remedies; Obtaining the Collateral Upon Default. Each Assignor
-----------------------------------------------
agrees that, if any Event of Default shall have occurred and be continuing, then
and in every such case, the Collateral Agent, in addition to any rights now or
hereafter existing under applicable law, shall have all rights as a secured
creditor under the Uniform Commercial Code in all relevant jurisdictions and
may:
(i) personally, or by agents or attorneys, immediately take
possession of the Collateral or any part thereof, from such Assignor or any
other Person who then has possession of any part thereof with or without
notice or process of law, and for that purpose may enter upon such
Assignor's premises where any of the Collateral is located and remove the
same and use in connection with such removal any and all services,
supplies, aids and other facilities of such Assignor;
(ii) instruct the obligor or obligors on any agreement, instrument or
other obligation (including, without limitation, the Receivables and the
Contracts) constituting the Collateral to make any payment required by the
terms of such agreement, instrument or other obligation directly to the
Collateral Agent;
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Page 15
(iii) withdraw all monies, securities and instruments in the Cash
Collateral Account for application to the Obligations in accordance with
Section 7.4 hereof;
(iv) sell, assign or otherwise liquidate any or all of the
Collateral or any part thereof in accordance with Section 7.2 hereof, or
direct the relevant Assignor to sell, assign or otherwise liquidate any or
all of the Collateral or any part thereof, and, in each case, take
possession of the proceeds of any such sale or liquidation;
(v) take possession of the Collateral or any part thereof, by
directing the relevant Assignor in writing to deliver the same to the
Collateral Agent at any place or places designated by the Collateral Agent,
in which event such Assignor shall at its own expense:
(x) forthwith cause the same to be moved to the place or
places so designated by the Collateral Agent and there delivered to
the Collateral Agent;
(y) store and keep any Collateral so delivered to the
Collateral Agent at such place or places pending further action by the
Collateral Agent as provided in Section 7.2 hereof; and
(z) while the Collateral shall be so stored and kept,
provide such guards and maintenance services as shall be necessary to
protect the same and to preserve and maintain them in good condition;
and
(vi) license or sublicense, whether on an exclusive or nonexclusive
basis, any Marks, Patents or Copyrights included in the Collateral for such
term and on such conditions and in such manner as the Collateral Agent
shall in its sole judgment determine (taking into account such provisions
as may be necessary to protect and preserve such Marks, Patents or
Copyrights);
it being understood that each Assignor's obligation so to deliver the Collateral
is of the essence of this Agreement and that, accordingly, upon application to a
court of equity having jurisdiction, the Collateral Agent shall be entitled to a
decree requiring specific performance by such Assignor of said obligation. The
Secured Creditors agree that this Agreement may be enforced only by the action
of the Agent or the Collateral Agent, in each case acting upon the instructions
of the Required Banks (or, after the date on which all Credit Document
Obligations have been paid in full, the holders of at least the majority of the
outstanding Other Obligations) and that no other Secured Creditor shall have any
right individually to seek to enforce or to enforce this Agreement or to realize
upon the security to be granted hereby, it being understood and agreed that such
rights and remedies may be exercised by the Agent or the Collateral Agent
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Page 16
or the holders of at least a majority of the outstanding Interest Rate
Obligations, as the case maybe, for the benefit of the Secured Creditors upon
the terms of this Agreement.
7.2. Remedies; Disposition of the Collateral. Any Collateral
---------------------------------------
repossessed by the Collateral Agent under or pursuant to Section 7.1 hereof and
any other Collateral whether or not so repossessed by the Collateral Agent, may
be sold, assigned, leased or otherwise disposed of under one or more contracts
or as an entirety, and without the necessity of gathering at the place of sale
the property to be sold, and in general in such manner, at such time or times,
at such place or places and on such terms as the Collateral Agent may, in
compliance with any mandatory requirements of applicable law, determine to be
commercially reasonable. Any of the Collateral may be sold, leased or otherwise
disposed of, in the condition in which the same existed when taken by the
Collateral Agent or after any overhaul or repair at the expense of the relevant
Assignor which the Collateral Agent shall determine to be commercially
reasonable. Any such disposition which shall be a private sale or other private
proceedings permitted by such requirements shall be made upon not less than 10
days' written notice to the relevant Assignor specifying the time at which
such disposition is to be made and the intended sale price or other
consideration therefor, and shall be subject, for the 10 days after the giving
of such notice, to the right of the relevant Assignor or any nominee of such
Assignor to acquire the Collateral involved at a price or for such other
consideration at least equal to the intended sale price or other consideration
so specified. Any such disposition which shall be a public sale permitted by
such requirements shall be made upon not less than 10 days' written notice to
the relevant Assignor specifying the time and place of such sale and, in the
absence of applicable requirements of law, shall be by public auction (which
may, at the Collateral Agent's option, be subject to reserve), after publication
of notice of such auction not less than 10 days prior thereto in two newspapers
in general circulation in the City of New York. To the extent permitted by any
such requirement of law, the Collateral Agent may bid for and become the
purchaser of the Collateral or any item thereof, offered for sale in accordance
with this Section without accountability to the relevant Assignor. If, under
mandatory requirements of applicable law, the Collateral Agent shall be required
to make disposition of the Collateral within a period of time which does not
permit the giving of notice to the relevant Assignor as hereinabove specified,
the Collateral Agent need give such Assignor only such notice of disposition as
shall be reasonably practicable in view of such mandatory requirements of
applicable law.
7.3. Waiver of Claims. Except as otherwise provided in this
----------------
Agreement, EACH ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S
TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE
COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING
FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH SUCH
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EXHIBIT G
Page 17
ASSIGNOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE
UNITED STATES OR OF ANY STATE, and each Assignor hereby further waives, to the
extent permitted by law:
(i) all damages occasioned by such taking of possession except any
damages which are the direct result of the Collateral Agent's gross
negligence or willful misconduct;
(ii) all other requirements as to the time, place and terms of sale
or other requirements with respect to the enforcement of the Collateral
Agent's rights hereunder; and
(iii) all rights of redemption, appraisement, valuation, stay,
extension or moratorium now or hereafter in force under any applicable law
in order to prevent or delay the enforcement of this Agreement or the
absolute sale of the Collateral or any portion thereof, and each Assignor,
for itself and all who may claim under it, insofar as it or they now or
hereafter lawfully may, hereby waives the benefit of all such laws.
Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral shall operate to divest all right, title, interest, claim and
demand, either at law or in equity, of the relevant Assignor therein and
thereto, and shall be a perpetual bar both at law and in equity against such
Assignor and against any and all Persons claiming or attempting to claim the
Collateral so sold, optioned or realized upon, or any part thereof, from,
through and under such Assignor.
7.4. Application of Proceeds. (a) All moneys collected by the
-----------------------
Collateral Agent (or, to the extent the Pledge Agreement, the Mortgages or the
Additional Security Documents require proceeds of collateral under such Security
Documents to be applied in accordance with the provisions of this Agreement, the
Pledgee or Mortgagee under such other Security Document) upon any sale or other
disposition of the Collateral, together with all other moneys received by the
Collateral Agent hereunder, shall be applied as follows:
(i) first, to the payment of all Obligations owing the Collateral
Agent of the type provided in clauses (iii) and (iv) of the definition of
Obligations;
(ii) second, to the extent proceeds remain after the application
pursuant to the preceding clause (i), an amount equal to the outstanding
Obligations shall be paid to the Secured Creditors as provided in Section
7.4(c) hereof with each Secured Creditor receiving an amount equal to its
outstanding Obligations or, if the proceeds are insufficient to pay in full
all such Obligations, its Pro Rata Share (as defined below) of the amount
remaining to be distributed; and
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(iii) third, to the extent proceeds remain after the application
pursuant to the preceding clauses (i) and (ii) and following the
termination of this Agreement pursuant to Section 10.8 hereof, to the
relevant Assignor or, to the extent directed by such Assignor or a court of
competent jurisdiction, to whomever may be lawfully entitled to receive
such surplus.
(b) For purposes of this Agreement, "Pro Rata Share" shall mean, when
calculating a Secured Creditor's portion of any distribution or amount, that
amount (expressed as a percentage) equal to a fraction the numerator of which is
the then unpaid amount of such Secured Creditor's Obligations and the
denominator of which is the then outstanding amount of all Obligations.
(c) All payments required to be made to the Bank Creditors hereunder
shall be made to the Agent under the Credit Agreement for the account of the
Bank Creditors and all payments required to be made to the Other Creditors
hereunder shall be made directly to the respective Other Creditor.
(d) For purposes of applying payments received in accordance with
this Section 7.4, the Collateral Agent shall be entitled to rely upon (i) the
Agent under the Credit Agreement and (ii) the Other Creditors for a
determination (which the Agent, each Other Creditor and the Secured Creditors
agree (or shall agree) to provide upon request of the Collateral Agent) of the
outstanding Obligations owed to the Bank Creditors or the Other Creditors, as
the case may be. Unless it has actual knowledge (including by way of written
notice from a Bank Creditor or an Other Creditor) to the contrary, the Agent
under the Credit Agreement, in furnishing information pursuant to the preceding
sentence, and the Collateral Agent, in acting hereunder, shall be entitled to
assume that (x) no Credit Document Obligations other than principal, interest
and regularly accruing fees are owing to any Bank Creditor and (y) no Interest
Rate Protection Agreement or Other Hedging Agreement, or Other Obligations in
respect thereof, are in existence.
(e) It is understood that the Assignors shall remain jointly and
severally liable to the extent of any deficiency between the amount of the
proceeds of the Collateral and the aggregate amount of the sums referred to in
clause (a) of this Section 7.4 with respect to the relevant Assignor.
7.5. Remedies Cumulative. Each and every right, power and remedy
-------------------
hereby specifically given to the Collateral Agent shall be in addition to every
other right, power and remedy specifically given under this Agreement, the
Interest Rate Protection Agreements or Other Hedging Agreements, the other
Credit Documents or now or hereafter existing at law, in equity or by statute
and each and every right, power and remedy whether specifically herein given or
otherwise existing may be exercised from time to time or simultaneously and as
often
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and in such order as may be deemed expedient by the Collateral Agent. All
such rights, powers and remedies shall be cumulative and the exercise or the
beginning of the exercise of one shall not be deemed a waiver of the right to
exercise any other or others. No delay or omission of the Collateral Agent in
the exercise of any such right, power or remedy and no renewal or extension of
any of the Obligations shall impair any such right, power or remedy or shall be
construed to be a waiver of any Default or Event of Default or an acquiescence
therein. No notice to or demand on any Assignor in any case shall entitle it to
any other or further notice or demand in similar or other circumstances or
constitute a waiver of any of the rights of the Collateral Agent to any other or
further action in any circumstances without notice or demand. In the event that
the Collateral Agent shall bring any suit to enforce any of its rights hereunder
and shall be entitled to judgment, then in such suit the Collateral Agent may
recover reasonable expenses, including attorneys' fees, and the amounts thereof
shall be included in such judgment.
7.6. Discontinuance of Proceedings. In case the Collateral Agent
-----------------------------
shall have instituted any proceeding to enforce any right, power or remedy under
this Agreement by foreclosure, sale, entry or otherwise, and such proceeding
shall have been discontinued or abandoned for any reason or shall have been
determined adversely to the Collateral Agent, then and in every such case the
relevant Assignor, the Collateral Agent and each holder of any of the
Obligations shall be restored to their former positions and rights hereunder
with respect to the Collateral subject to the security interest created under
this Agreement, and all rights, remedies and powers of the Collateral Agent
shall continue as if no such proceeding had been instituted.
ARTICLE VIII
INDEMNITY
8.1. Indemnity. (a) Each Assignor jointly and severally agrees to
---------
indemnify, reimburse and hold the Collateral Agent, each other Secured Creditor
and their respective successors, permitted assigns, employees, agents and
servants (hereinafter in this Section 8.1 referred to individually as
"Indemnitee," and collectively as "Indemnitees") harmless from any and all
liabilities, obligations, damages, injuries, penalties, claims, demands,
actions, suits, judgments and any and all costs, expenses or disbursements
(including attorneys' fees and expenses) (for the purposes of this Section 8.1
the foregoing are collectively called "expenses") of whatsoever kind and nature
imposed on, asserted against or incurred by any of the Indemnitees in any way
relating to or arising out of this Agreement, any Interest Rate Protection
Agreement or Other Hedging Agreement, any other Credit Document or any other
document executed in connection herewith or therewith or in any other way
connected with the administration of the transactions contemplated hereby or
thereby or the enforcement of any of
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the terms of, or the preservation of any rights under any thereof, or in any way
relating to or arising out of the manufacture, ownership, ordering, purchase,
delivery, control, acceptance, lease, financing, possession, operation,
condition, sale, return or other disposition, or use of the Collateral
(including, without limitation, latent or other defects, whether or not
discoverable), the violation of the laws of any country, state or other
governmental body or unit, any tort (including, without limitation, claims
arising or imposed under the doctrine of strict liability, or for or on account
of injury to or the death of any Person (including any Indemnitee), or property
damage), or contract claim; provided that no Indemnitee shall be indemnified
pursuant to this Section 8.1(a) for losses, damages or liabilities to the extent
caused by the gross negligence or willful misconduct of such Indemnitee. Each
Assignor agrees that upon written notice by any Indemnitee of the assertion of
such a liability, obligation, damage, injury, penalty, claim, demand, action,
suit or judgment, the relevant Assignor shall assume full responsibility for the
defense thereof. Each Indemnitee agrees to use its best efforts to promptly
notify the relevant Assignor of any such assertion of which such Indemnitee has
knowledge.
(b) Without limiting the application of Section 8.1(a) hereof, each
Assignor agrees, jointly and severally, to pay, or reimburse the Collateral
Agent for any and all reasonable fees, costs and expenses of whatever kind or
nature incurred in connection with the creation, preservation or protection of
the Collateral Agent's Liens on, and security interest in, the Collateral,
including, without limitation, all fees and taxes in connection with the
recording or filing of instruments and documents in public offices, payment or
discharge of any taxes or Liens upon or in respect of the Collateral, premiums
for insurance with respect to the Collateral and all other fees, costs and
expenses in connection with protecting, maintaining or preserving the Collateral
and the Collateral Agent's interest therein, whether through judicial
proceedings or otherwise, or in defending or prosecuting any actions, suits or
proceedings arising out of or relating to the Collateral.
(c) Without limiting the application of Section 8.1(a) or (b) hereof,
each Assignor agrees, jointly and severally, to pay, indemnify and hold each
Indemnitee harmless from and against any loss, costs, damages and expenses which
such Indemnitee may suffer, expend or incur in consequence of or growing out of
any misrepresentation by any Assignor in this Agreement, any Interest Rate
Protection Agreement or Other Hedging Agreement, any other Credit Document or in
any writing contemplated by or made or delivered pursuant to or in connection
with this Agreement, any Interest Rate Protection Agreement or Other Hedging
Agreement or any other Credit Document.
(d) If and to the extent that the obligations of any Assignor under
this Section 8.1 are unenforceable for any reason, such Assignor hereby agrees
to make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.
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8.2. Indemnity Obligations Secured by Collateral; Survival. Any
-----------------------------------------------------
amounts paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement shall constitute Obligations secured by the Collateral. The
indemnity obligations of each Assignor contained in this Article VIII shall
continue in full force and effect notwithstanding the full payment of all the
Notes issued under the Credit Agreement, the termination of all Interest Rate
Protection Agreements or Other Hedging Agreements and the payment of all other
Obligations and notwithstanding the discharge thereof.
ARTICLE IX
DEFINITIONS
The following terms shall have the meanings herein specified. Such
definitions shall be equally applicable to the singular and plural forms of the
terms defined.
"Agent" shall have the meaning provided in the recitals to this
Agreement.
"Agreement" shall mean this Security Agreement as the same may be
modified, supplemented or amended from time to time in accordance with its
terms.
"Assignor" shall have the meaning provided in the first paragraph of
this Agreement.
"Bank Creditors" shall have the meaning provided in the recitals to
this Agreement.
"Banks" shall have the meaning provided in the recitals to this
Agreement.
"Borrower" shall have the meaning provided in the recitals to this
Agreement.
"Cash Collateral Account" shall mean a cash collateral account
maintained with, and in the sole dominion and control of, the Collateral Agent
for the benefit of the Secured Creditors.
"Chattel Paper" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Class" shall have the meaning provided in Section 10.2 of this
Agreement.
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"Collateral" shall have the meaning provided in Section 1.1(a) of this
Agreement.
"Collateral Agent" shall have the meaning provided in the first
paragraph of this Agreement.
"Contract Rights" shall mean all rights of any Assignor (including,
without limitation, all rights to payment) under each Contract.
"Contracts" shall mean all contracts between any Assignor and one or
more additional parties (including, without limitation, any Interest Rate
Protection Agreements or Other Hedging Agreements).
"Copyrights" shall mean any United States or foreign copyright owned
by any Assignor, including any registrations of any Copyrights, in the United
States Copyright Office or the equivalent thereof in any foreign country, other
than those countries outside the United States where the grant of a security
interest would invalidate such Copyrights, as well as any application for a
United States copyright registration now or hereafter made with the United
States Copyright Office by any Assignor.
"Credit Agreement" shall have the meaning provided in the recitals to
this Agreement.
"Credit Document Obligations" shall have the meaning provided in the
definition of "Obligations" in this Article IX.
"Default" shall mean any event which, with notice or lapse of time, or
both, would constitute an Event of Default.
"Documents" shall have the meaning provided in the Uniform Commercial
Code as in effect on the date hereof in the State of New York.
"Equipment" shall mean any "equipment," as such term is defined in the
Uniform Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter owned by any Assignor and, in any event, shall include,
but shall not be limited to, all machinery, equipment, furnishings, movable
trade fixtures and vehicles now or hereafter owned by any Assignor and any and
all additions, substitutions and replacements of any of the foregoing, wherever
located, together with all attachments, components, parts, equipment and
accessories installed thereon or affixed thereto.
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"Event of Default" shall mean any Event of Default under, and as
defined in, the Credit Agreement and shall in any event, without limitation,
include any payment default on any of the Obligations after the expiration of
any applicable grace period.
"General Intangibles" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Goods" shall have the meaning provided in the Uniform Commercial Code
as in effect on the date hereof in the State of New York.
"Holdings" shall have the meaning provided in the recitals to this
Agreement.
"Indemnitee" shall have the meaning provided in Section 8.1 of this
Agreement.
"Instrument" shall have the meaning provided in the Uniform Commercial
Code as in effect on the date hereof in the State of New York.
"Interest Rate Protection Agreements or Other Hedging Agreements"
shall have the meaning provided in the recitals to this Agreement.
"Inventory" shall mean merchandise, inventory and goods, and all
additions, substitutions and replacements thereof, wherever located, together
with all goods, supplies, incidentals, packaging materials, labels, materials
and any other items used or usable in manufacturing, processing, packaging or
shipping same; in all stages of production -- from raw materials through work-
in-process to finished goods -- and all products and proceeds of whatever sort
and wherever located and any portion thereof which may be returned, rejected,
reclaimed or repossessed by the Collateral Agent from any Assignor's customers,
and shall specifically include all "inventory" as such term is defined in the
Uniform Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter owned by any Assignor.
"Liens" shall mean any security interest, mortgage, pledge, lien,
claim, charge, encumbrance, title retention agreement, lessor's interest in a
financing lease or analogous instrument, in, of, or on any Assignor's property.
"Marks" shall mean all right, title and interest in and to any United
States or foreign trademarks, service marks and trade names now held or
hereafter acquired by any Assignor, including any registration of any trademarks
and service marks in the United States Patent and Trademark Office, or the
equivalent thereof in any foreign country, other than those countries outside
the United States, where the grant of a security interest would invalidate such
Marks, and any trade dress including logos and/or designs used by any Assignor
in the United States or any foreign country.
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"Obligations" shall mean (i) the full and prompt payment when due
(whether at the stated maturity, by acceleration or otherwise) of all
obligations (including obligations which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due) and liabilities of each
Assignor, now existing or hereafter incurred under, arising out of or in
connection with any Credit Document to which such Assignor is a party and the
due performance and compliance by each Assignor with the terms of each such
Credit Document (all such obligations and liabilities under this clause (i),
except to the extent consisting of obligations or indebtedness with respect to
Interest Rate Protection Agreements or Other Hedging Agreements, being herein
collectively called the "Credit Document Obligations"); (ii) the full and prompt
payment when due (whether at the stated maturity, by acceleration or otherwise)
of all obligations (including obligations which, but for the automatic stay
under Section 362(a) of the Bankruptcy Code, would become due) and liabilities
of each Assignor now existing or hereafter incurred under, arising out of or in
connection with any Interest Rate Protection Agreement or Other Hedging
Agreement including, in the case of Assignors other than the Borrower, all
obligations of such Assignor under its Guaranty in respect of Interest Rate
Protection Agreements or Other Hedging Agreements (all such obligations and
liabilities under this clause (ii) being herein collectively called the "Other
Obligations"); (iii) any and all sums advanced by the Collateral Agent in order
to preserve the Collateral or preserve its security interest in the Collateral;
(iv) in the event of any proceeding for the collection or enforcement of any
indebtedness, obligations, or liabilities of each Assignor referred to in
clauses (i) and (ii), after an Event of Default shall have occurred and be
continuing, the reasonable expenses of re-taking, holding, preparing for sale or
lease, selling or otherwise disposing of or realizing on the Collateral, or of
any exercise by the Collateral Agent of its rights hereunder, together with
reasonable attorneys' fees and court costs; and (v) all amounts paid by any
Indemnitee as to which such Indemnitee has the right to reimbursement under
Section 8.1 of this Agreement.
"Other Creditors" shall have the meaning provided in the recitals to
this Agreement.
"Other Obligations" shall have the meaning provided in the definition
of "Obligations" in this Article IX.
"Patents" shall mean any United States or foreign patent to which any
Assignor now or hereafter has title and any divisions or continuations thereof,
as well as any application for a United States or foreign patent now or
hereafter made by any Assignor, except as to patents or patent applications in
those countries where the granting of a security interest in such patents is not
permissible under the laws of that country.
"Proceeds" shall have the meaning provided in the Uniform Commercial
Code as in effect in the State of New York on the date hereof or under other
relevant law and, in any
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Page 25
event, shall include, but not be limited to, (i) any and all proceeds of any
insurance, indemnity, warranty or guaranty payable to the Collateral Agent or
any Assignor from time to time with respect to any of the Collateral, (ii) any
and all payments (in any form whatsoever) made or due and payable to any
Assignor from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Collateral by any
governmental authority (or any person acting under color of governmental
authority) and (iii) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.
"Pro Rata Share" shall have the meaning provided in Section 7.4(b) of
this Agreement.
"Receivables" shall mean any "account" as such term is defined in the
Uniform Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter owned by any Assignor and, in any event, shall include,
but shall not be limited to, all of such Assignor's rights to payment for goods
sold or leased or services performed by such Assignor, whether now in existence
or arising from time to time hereafter, including, without limitation, rights
evidenced by an account, note, contract, security agreement, chattel paper, or
other evidence of indebtedness or security, together with (a) all security
pledged, assigned, hypothecated or granted to or held by such Assignor to secure
the foregoing, (b) all of any Assignor's right, title and interest in and to any
goods, the sale of which gave rise thereto, (c) all guarantees, endorsements
and indemnifications on, or of, any of the foregoing, (d) all powers of attorney
for the execution of any evidence of indebtedness or security or other writing
in connection therewith, (e) all books, records, ledger cards, and invoices
relating thereto, (f) all evidences of the filing of financing statements and
other statements and the registration of other instruments in connection
therewith and amendments thereto, notices to other creditors or secured parties,
and certificates from filing or other registration officers, (g) all credit
information, reports and memoranda relating thereto and (h) all other writings
related in any way to the foregoing.
"Requisite Creditors" shall have the meaning provided in Section 10.2
of this Agreement.
"Secured Creditors" shall have the meaning provided in the recitals to
this Agreement.
"Termination Date" shall have the meaning provided in Section 10.8 of
this Agreement.
"Trade Secret Rights" shall have the meaning provided in Section 5.1
of this Agreement.
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ARTICLE X
MISCELLANEOUS
10.1. Notices. Except as otherwise specified herein, all notices,
-------
requests, demands or other communications to or upon the respective parties
hereto shall be deemed to have been duly given or made when delivered to the
party to which such notice, request, demand or other communication is required
or permitted to be given or made under this Agreement, addressed:
(a) if to any Assignor, at its address set forth opposite its
signature below;
(b) if to the Collateral Agent:
Bankers Trust Company
One Bankers Trust Plaza
New York, New York 10006
Attention: Mary Kay Coyle
Telephone No.: (212) 250-9094
Facsimile No.: (212) 250-7218;
(c) if to any Bank Creditor (other than the Collateral Agent), at
such address as such Bank Creditor shall have specified in the Credit
Agreement;
(d) if to any Other Creditor, at such address as such Other Creditor
shall have specified in writing to each Assignor and the Collateral Agent;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
10.2. Waiver; Amendment. None of the terms and conditions of this
-----------------
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by each Assignor directly affected thereby and the
Collateral Agent (with the consent of (x) either the Required Banks or, to the
extent required by Section 12.12 of the Credit Agreement, all of the Banks at
all times prior to the time on which all Credit Document Obligations have been
paid in full or (y) the holders of at least a majority of the outstanding Other
Obligations at all times after the time on which all Credit Document Obligations
have been paid in full); provided, that any change, waiver, modification or
--------
variance affecting the rights and benefits of a single Class of Secured
Creditors (and not all Secured Creditors in a like or similar manner) shall
require the written consent of the Requisite Creditors of such Class
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of Secured Creditors. For the purpose of this Agreement the term "Class" shall
mean each class of Secured Creditors, i.e., whether (x) the Bank Creditors as
---
holders of the Credit Document Obligations or (y) the Other Creditors as the
holders of the Other Obligations. For the purpose of this Agreement, the term
"Requisite Creditors" of any Class shall mean each of (x) with respect to the
Credit Document Obligations, the Required Banks and (y) with respect to the
Other Obligations, the holders of at least a majority of all obligations
outstanding from time to time under the Interest Rate Protection Agreements or
Other Hedging Agreements.
10.3. Obligations Absolute. The obligations of each Assignor
--------------------
hereunder shall remain in full force and effect without regard to, and shall not
be impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of such Assignor; (b) any
exercise or non-exercise, or any waiver of, any right, remedy, power or
privilege under or in respect of this Agreement, any other Credit Document or
any Interest Rate Protection Agreement or Other Hedging Agreement; or (c) any
amendment to or modification of any Credit Document or any Interest Rate
Protection Agreement or Other Hedging Agreement or any security for any of the
Obligations; whether or not any Assignor shall have notice or knowledge of any
of the foregoing.
10.4. Successors and Assigns. This Agreement shall be binding upon
----------------------
each Assignor and its successors and assigns and shall inure to the benefit of
the Collateral Agent and its successors and assigns; provided, that no Assignor
--------
may transfer or assign any or all of its rights or obligations hereunder without
the prior written consent of the Collateral Agent. All agreements, statements,
representations and warranties made by each Assignor herein or in any
certificate or other instrument delivered by such Assignor or on its behalf
under this Agreement shall be considered to have been relied upon by the Secured
Creditors and shall survive the execution and delivery of this Agreement, the
other Credit Documents and the Interest Rate Protection Agreements or Other
Hedging Agreements regardless of any investigation made by the Secured Creditors
or on their behalf.
10.5. Headings Descriptive. The headings of the several sections
--------------------
of this Agreement are inserted for convenience only and shall not in any way
affect the meaning or construction of any provision of this Agreement.
10.6. Governing Law. THIS AGREEMENT AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
10.7. Assignor's Duties. It is expressly agreed, anything herein
-----------------
contained to the contrary notwithstanding, that each Assignor shall remain
liable to perform all of the obligations, if any, assumed by it with respect to
the Collateral and the Collateral Agent shall
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Page 28
not have any obligations or liabilities with respect to any Collateral by reason
of or arising out of this Agreement, nor shall the Collateral Agent be required
or obligated in any manner to perform or fulfill any of the obligations of each
Assignor under or with respect to any Collateral.
10.8. Termination; Release. (a) After the Termination Date, this
--------------------
Agreement shall terminate (provided that all indemnities set forth herein
including, without limitation, in Section 8.1 hereof shall survive such
termination) and the Collateral Agent, at the request and expense of the
respective Assignor, will promptly execute and deliver to such Assignor a proper
instrument or instruments (including Uniform Commercial Code termination
statements on form UCC-3) acknowledging the satisfaction and termination of this
Agreement, and will duly assign, transfer and deliver to such Assignor (without
recourse and without any representation or warranty) such of the Collateral as
may be in the possession of the Collateral Agent and as has not theretofore been
sold or otherwise applied or released pursuant to this Agreement. As used in
this Agreement, "Termination Date" shall mean the date upon which the Total
Commitment and all Interest Rate Protection Agreements or Other Hedging
Agreements have been terminated, no Note or Letter of Credit is outstanding
(other than Letters of Credit, together with all Fees that have accrued and will
accrue thereon through the stated termination date of such Letters of Credit,
which have been supported in a manner satisfactory to the Letter of Credit
Issuer in its sole and absolute discretion) and all other Obligations (other
than any indemnities described in Section 8.1 hereof and in Section 12.13 of the
Credit Agreement which are not then due and payable) have been paid in full.
(b) In the event that any part of the Collateral is sold or otherwise
disposed of in connection with a sale or other disposition permitted by Section
8.02 of the Credit Agreement or is otherwise released at the direction of the
Required Banks (or all the Banks if required by Section 12.12 of the Credit
Agreement), the Collateral Agent, at the request and expense of such Assignor,
will duly release from the security interest created hereby and assign, transfer
and deliver to such Assignor (without recourse and without any representation or
warranty) such of the Collateral as is then being (or has been) so sold or
released and as may be in the possession of the Collateral Agent and has not
theretofore been released pursuant to this Agreement.
(c) At any time that the respective Assignor desires that Collateral
be released as provided in the foregoing Section 10.8(a) or (b), it shall
deliver to the Collateral Agent a certificate signed by an Authorized Officer
stating that the release of the respective Collateral is permitted pursuant to
Section 10.8(a) or (b) hereof.
10.9. Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and
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Page 29
the same instrument. A set of counterparts executed by all the parties hereto
shall be lodged with the Borrower and the Collateral Agent.
10.10. The Collateral Agent. The Collateral Agent will hold in
--------------------
accordance with this Agreement all items of the Collateral at any time received
under this Agreement. It is expressly understood and agreed that the
obligations of the Collateral Agent as holder of the Collateral and interests
therein and with respect to the disposition thereof, and otherwise under this
Agreement, are only those expressly set forth in this Agreement and as provided
in the Uniform Commercial Code in the State of New York. The Collateral Agent
shall act hereunder on the terms and conditions set forth in Section 11 of the
Credit Agreement.
10.11. Additional Assignors. It is understood and agreed that any
--------------------
Subsidiary of Holdings that is required to execute a counterpart of this
Agreement after the date hereof pursuant to Sections 7.15 and/or 8.14 of the
Credit Agreement shall automatically become an Assignor hereunder by executing a
counterpart hereof and delivering the same to the Collateral Agent.
* * *
-29-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
Address: WESLEY-JESSEN HOLDINGS, INC.,
333 East Howard Avenue as an Assignor
Des Plaines, Illinois 60018
Attention: Edward Kelley
By Edward J. Kelley
---------------------------------
Title: Chief Financial Officer
Address: WESLEY-JESSEN CORPORATION,
333 East Howard Avenue as an Assignor
Des Plaines, Illinois 60018
Attention: Edward Kelley
By Gerald B. Sweeney
---------------------------------
Title: Assistant Secretary
Address: PILKINGTON BARNES HIND, INC.
333 East Howard Avenue (named to be changed to PBH, Inc.),
Des Plaines, Illinois 60018 as an Assignor
Attention: Edward Kelley
By Gerald B. Sweeney
---------------------------------
Title: Assistant Secretary
Address: PILKINGTON BARNES HIND
333 East Howard Avenue INTERNATIONAL, INC. (named to be
Des Plaines, Illinois 60018 changed to PBH International, Inc.),
Attention: Edward Kelley as an Assignor
By Gerald B. Sweeney
---------------------------------
Title: Assistant Secretary
Address: BARNES HIND INTERNATIONAL,
<PAGE>
333 East Howard Avenue INC.,
Des Plaines, Illinois 60018 as an Assignor
Attention: Edward Kelley
By Gerald B. Sweeney
---------------------------------
Title: Assistant Secretary
Address: WESLEY-JESSEN (PUERTO RICO),
333 East Howard Avenue INC.,
Des Plaines, Illinois 60018 as an Assignor
Attention: Edward Kelley
By Gerald B. Sweeney
---------------------------------
Title: Assistant Secretary
BANKERS TRUST COMPANY,
as Collateral Agent
By Mary Kay Coyle
-------------------------
Title: Managing Director
<PAGE>
ANNEX A
to
SECURITY
AGREEMENT
---------
SCHEDULE OF CHIEF EXECUTIVE OFFICES
-----------------------------------
AND OTHER RECORD LOCATIONS
--------------------------
[TO BE PROVIDED]
<PAGE>
ANNEX B
to
SECURITY
AGREEMENT
---------
SCHEDULE OF INVENTORY AND EQUIPMENT LOCATIONS
---------------------------------------------
[TO BE PROVIDED]
<PAGE>
ANNEX C
to
SECURITY
AGREEMENT
---------
TRADE AND FICTITIOUS NAMES
--------------------------
[TO BE PROVIDED]
<PAGE>
ANNEX D
to
BORROWER
SECURITY
AGREEMENT
---------
LIST OF MARKS
-------------
[TO BE PROVIDED]
<PAGE>
ANNEX E
to
SECURITY
AGREEMENT
---------
LIST OF PATENTS AND APPLICATIONS
--------------------------------
[TO BE PROVIDED]
<PAGE>
ANNEX F
to
SECURITY
AGREEMENT
---------
LIST OF COPYRIGHTS AND APPLICATIONS
-----------------------------------
[TO BE PROVIDED]
<PAGE>
ANNEX G
-------
GRANT OF SECURITY INTEREST
IN UNITED STATES TRADEMARKS AND PATENTS
---------------------------------------------
FOR GOOD AND VALUABLE CONSIDERATION, receipt and sufficiency of which
are hereby acknowledged, [Name of Grantor], a _______________ corporation ("the
Grantor") with principal offices at_______________________________, hereby
grants to Bankers Trust Company, as Collateral Agent, with principal offices at
One Bankers Trust Plaza, New York, New York 10006 (the "Grantee"), a security
interest in (i) all of the Grantor's right, title and interest in and to the
United States trademarks, trademark registrations and trademark applications
(the "Marks") set forth on Schedule A attached hereto, (ii) all of the Grantor's
rights, title and interest in and to the United States patents (the "Patents")
set forth on Schedule B attached, in each case together with (iii) all Proceeds
(as such term is defined in the Security Agreement referred to below) and
products of the Marks and Patents, (iv) the goodwill of the businesses with
which the Marks are associated and (v) all causes of action arising prior to or
after the date hereof for infringement of any of the Marks and Patents or unfair
competition regarding the same.
THIS AGREEMENT is made to secure the satisfactory performance and
payment of all the Obligations of the Grantor, as such term is defined in the
Security Agreement among Grantor, the other assignors from time to time party
thereto and the Grantee, dated as of October 2, 1996 (as amended from time to
time, the "Security Agreement"). Upon the occurrence of the Termination Date
(as defined in the Security Agreement), the Grantee
<PAGE>
ANNEX G
Page 2
shall, upon such satisfaction, execute, acknowledge, and deliver to the Grantor
an instrument in writing releasing the security interest in the Marks and
Patents acquired under this Agreement.
This Agreement has been granted in conjunction with the security
interest granted to the Grantee under the Security Agreement. The rights and
remedies of the Grantee with respect to the security interest granted herein are
without prejudice to, and are in addition to those set forth in the Security
Agreement, all terms and provisions of which are incorporated herein by
reference. In the event that any provisions of this Agreement are deemed to
conflict with the Security Agreement, the provisions of the Security Agreement
shall govern.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the ___ day of October, 1996.
[NAME OF GRANTOR],
as Grantor
By
-----------------------------
Title:
BANKERS TRUST COMPANY,
as Collateral Agent and Grantee
By
-----------------------------
Title:
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ___ day of October, 1996, before me personally came
_________________ who, being by me duly sworn, did state as follows: that [s]he
is _______________ of [Name of Grantor], that [s]he is authorized to execute the
foregoing Agreement on behalf of said corporation and that [s]he did so by
authority of the Board of Directors of said corporation.
_________________________
Notary Public
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ___ day of October, 1996, before me personally came
_____________________ who, being by me duly sworn, did state as follows: that
[s]he is __________________ of Bankers Trust Company, that [s]he is authorized
to execute the foregoing Agreement on behalf of said corporation and that [s]he
did so by authority of the Board of Directors of said corporation.
____________________________
Notary Public
<PAGE>
SCHEDULE A
----------
MARK REG. NO. REG. DATE
- ---- -------- ---------
<PAGE>
SCHEDULE B
----------
PATENT PATENT NO. ISSUE DATE
- ------ ---------- ----------
<PAGE>
ANNEX H
-------
GRANT OF SECURITY INTEREST
IN UNITED STATES COPYRIGHTS
WHEREAS, [Name of Grantor], a _______________ corporation (the
"Grantor"), having its chief executive office at
_____________________________________________, ____________________________, is
the owner of all right, title and interest in and to the United States
copyrights and associated United States copyright registrations and applications
for registration set forth in Schedule A attached hereto;
WHEREAS, BANKERS TRUST COMPANY, as Collateral Agent, having its
principal offices at One Bankers Trust Plaza, New York, New York 10006 (the
"Grantee"), desires to acquire a security interest in said copyrights and
copyright registrations and applications therefor; and
WHEREAS, the Grantor is willing to grant to the Grantee a security
interest in and lien upon the copyrights and copyright registrations and
applications therefor described above;
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, and subject to the terms and conditions of the
Security Agreement, dated as of October 2, 1996, made by the Grantor, the other
assignors from time to time party thereto and the Grantee (as amended from time
to time, the "Security Agreement"), the Grantor hereby grants to the Grantee a
security interest in the copyrights and copyright registrations and applications
therefor set forth in Schedule A attached hereto.
This Agreement has been granted in conjunction with the security
interest granted to the Grantee under the Security Agreement. The rights and
remedies of the Grantee with respect to the security interest granted herein are
without prejudice to, and are in addition to those set forth in the Security
Agreement, all terms and provisions of which are incorporated herein by
reference. In the event that any provisions of this Agreement are deemed to
conflict with the Security Agreement, the provisions of the Security Agreement
shall govern.
<PAGE>
ANNEX H
Page 2
Executed at New York, New York, the ___ day of October, 1996.
[NAME OF GRANTOR]
By
-------------------------
Name:
Title:
BANKERS TRUST COMPANY
By
-------------------------
Name:
Title:
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ___ day of October, 1996 before me personally came
_______________, who being duly sworn, did depose and say that [s]he is
___________________ of [Name of Grantor], that [s]he is authorized to execute
the foregoing Agreement on behalf of said corporation and that [s]he did so by
authority of the Board of Directors of said corporation.
_________________________
Notary Public
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ___ day of October, 1996, before me personally came
_____________________ who, being by me duly sworn, did state as follows: that
[s]he is __________________ of Bankers Trust Company, that [s]he is authorized
to execute the foregoing Agreement on behalf of said corporation and that [s]he
did so by authority of the Board of Directors of said corporation.
____________________________
Notary Public
<PAGE>
SCHEDULE A
----------
U.S. COPYRIGHTS
---------------
REGISTRATION PUBLICATION
NUMBERS DATE COPYRIGHT TITLE
------------ ----------- ---------------
<PAGE>
EXHIBIT 4.6
-----------
PLEDGE AGREEMENT
----------------
PLEDGE AGREEMENT, dated as of October 2, 1996 (as amended, modified or
supplemented from time to time, this "Agreement"), made by each of the
undersigned (each, a "Pledgor" and, together with any other entity that becomes
a party hereto pursuant to Section 22 hereof, the "Pledgors"), in favor of
BANKERS TRUST COMPANY, as Collateral Agent (the "Pledgee"), for the benefit of
the Secured Creditors (as defined below). Except as otherwise defined herein,
terms used herein and defined in the Credit Agreement (as defined below) shall
be used herein as therein defined.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Wesley-Jessen Holding, Inc. ("Holdings"), Wesley-Jessen
Corporation (the "Borrower"), the financial institutions from time to time party
thereto (the "Banks"), and Bankers Trust Company, as Agent (together with any
successor agent, the "Agent", and together with the Pledgee and the Banks, the
"Bank Creditors"), have entered into a Credit Agreement, dated as of October 2,
1996 (as amended, modified or supplemented from time to time, the "Credit
Agreement"), providing for the making of Loans to the Borrower and the issuance
of, and participation in, Letters of Credit for the account of the Borrower, all
as contemplated therein;
WHEREAS, the Borrower may from time to time be party to one or more
(i) interest rate agreements, interest rate cap agreements, interest rate collar
agreements or other similar agreements or arrangements, (ii) foreign exchange
contracts, currency swap agreements or similar agreements or arrangements
designed to protect against the fluctuations in currency values and/or
(iii) other types of hedging agreements from time to time (each such agreement
or arrangement with an Other Creditor (as hereinafter defined), an "Interest
Rate Protection Agreement or Other Hedging Agreement"), with a Bank or an
affiliate of a Bank (each such Bank or affiliate, even if the respective Bank
subsequently ceases to be a Bank under the Credit Agreement for any reason,
together with such Bank's or affiliate's successors and assigns, collectively,
the "Other Creditors," and together with Bank Creditors, the "Secured
Creditors");
WHEREAS, pursuant to the Holdings Guaranty, Holdings has guaranteed to
the Secured Creditors the payment when due of all obligations and liabilities of
the Borrower
<PAGE>
EXHIBIT 4.6
Page 2
under or with respect to the Credit Documents and the Interest Rate Protection
Agreements or Other Hedging Agreements;
WHEREAS, pursuant to the Subsidiary Guaranty, each Pledgor (other than
Holdings and the Borrower) has jointly and severally guaranteed to the Secured
Creditors the payment when due of all obligations and liabilities of the
Borrower under or with respect to the Credit Documents and the Interest Rate
Protection Agreements or Other Hedging Agreements;
WHEREAS, it is a condition precedent to the making of Loans to the
Borrower under the Credit Agreement that each Pledgor shall have executed and
delivered to the Pledgee this Agreement; and
WHEREAS, each Pledgor desires to execute this Agreement to satisfy the
conditions described in the preceding paragraph;
NOW, THEREFORE, in consideration of the benefits accruing to each
Pledgor, the receipt and sufficiency of which are hereby acknowledged, each
Pledgor hereby makes the following representations and warranties to the Pledgee
and hereby covenants and agrees with the Pledgee as follows:
1. SECURITY FOR OBLIGATIONS. This Agreement is made by each Pledgor
for the benefit of the Secured Creditors to secure:
(i) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations and liabilities
(including obligations which, but for the automatic stay under Section
362(a) of the Bankruptcy Code, would become due) of such Pledgor, now
existing or hereafter incurred under, arising out of or in connection with
any Credit Document to which such Pledgor is a party and the due
performance and compliance by such Pledgor with the terms of each such
Credit Document (all such obligations and liabilities under this clause
(i), except to the extent consisting of obligations or indebtedness with
respect to Interest Rate Protection Agreements or Other Hedging Agreements,
being herein collectively called the "Credit Document Obligations");
(ii) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations (including
obligations which, but for the automatic stay under Section 362(a) of the
Bankruptcy Code, would become due) and liabilities of such Pledgor, now
existing or hereafter incurred under, arising out of or in connection with
any Interest Rate Protection Agreement or Other Hedging
<PAGE>
EXHIBIT 4.6
Page 3
Agreement including, in the case of Pledgors other than the Borrower, all
obligations of such Pledgor under its Guaranty in respect of Interest Rate
Protection Agreements or Other Hedging Agreements (all such obligations and
liabilities under this clause (ii) being herein collectively called the
"Other Obligations");
(iii) any and all sums advanced by the Pledgee in order to preserve
the Collateral (as hereinafter defined) or preserve its security interest
in the Collateral;
(iv) in the event of any proceeding for the collection or enforcement
of any indebtedness, obligations, or liabilities referred to in clauses
(i), (ii) and (iii) above, after an Event of Default (such term, as used in
this Agreement, shall mean any Event of Default under, and as defined in,
the Credit Agreement, or any payment default by the Borrower under any
Interest Rate Protection Agreement or Other Hedging Agreement and shall in
any event include, without limitation, any payment default (after the
expiration of any applicable grace period) on any of the Obligations (as
hereinafter defined)) shall have occurred and be continuing, the reasonable
expenses of retaking, holding, preparing for sale or lease, selling or
otherwise disposing or realizing on the Collateral, or of any exercise by
the Pledgee of its rights hereunder, together with reasonable attorneys'
fees and court costs; and
(v) all amounts paid by any Secured Creditor as to which such
Secured Creditor has the right to reimbursement under Section 11 of this
Agreement;
all such obligations, liabilities, sums and expenses set forth in clauses
(i) through (v) of this Section 1 being herein collectively called the
"Obligations".
2. DEFINITION OF STOCK, NOTES, SECURITIES, ETC. As used herein:
(i) the term "Stock" shall mean (x) with respect to corporations incorporated
under the laws of the United States or any State or territory thereof (each, a
"Domestic Corporation"), all of the issued and outstanding shares of capital
stock of any Domestic Corporation at any time owned by each Pledgor and (y) with
respect to corporations not Domestic Corporations (each, a "Foreign
Corporation"), all of the issued and outstanding shares of capital stock at any
time directly owned by any Pledgor of any Foreign Corporation, provided that,
--------
except as provided in the last sentence of this Section 2, such Pledgor shall
not be required to pledge hereunder more than 65% of the total combined voting
power of all classes of capital stock of any Foreign Corporation entitled to
vote; (ii) the term "Notes" shall mean (x) all Intercompany Notes at any time
issued to each Pledgor and (y) all other promissory notes from time to time
issued to, or held by, each Pledgor; provided, that, except as provided in the
--------
last sentence of this Section 2, no Pledgor shall be required to pledge
hereunder any promissory notes (including Intercompany Notes) issued to such
Pledgor by any Subsidiary of such Pledgor which is a
<PAGE>
EXHIBIT 4.6
Page 4
Foreign Corporation and (iii) the term "Securities" shall mean all of the Stock
and Notes; provided that, notwithstanding the foregoing, the term "Securities"
--------
shall not include any Notes listed in Annex D hereto. Each Pledgor represents
and warrants that on the date hereof (i) each Subsidiary of such Pledgor, and
the direct ownership thereof, is listed in Annex A hereto; (ii) the Stock held
by such Pledgor consists of the number and type of shares of the stock of the
corporations as described in Annex B hereto; (iii) such Stock constitutes that
percentage of the issued and outstanding capital stock of the issuing
corporation as is set forth in Annex B hereto; (iv) the Notes held by such
Pledgor consist of the promissory notes described in Annex C hereto where such
Pledgor is listed as the Lender; and (v) on the date hereof, such Pledgor owns
no other Securities. In the circumstances and to the extent provided in Section
7.15 of the Credit Agreement, the 65% limitation set forth in clause (i)(y) and
the limitation in the proviso of clause (ii) in each case of this Section 2 and
in Section 3.2 hereof shall no longer be applicable and such Pledgor shall duly
pledge and deliver to the Pledgee such of the Securities not theretofore
required to be pledged hereunder.
3. PLEDGE OF SECURITIES, ETC.
3.1. Pledge. To secure the Obligations and for the purposes set forth
------
in Section 1 hereof, each Pledgor hereby: (i) grants to the Pledgee a security
interest in all of the Collateral owned by such Pledgor; (ii) pledges and
deposits as security with the Pledgee the Securities owned by such Pledgor on
the date hereof, and delivers to the Pledgee certificates or instruments
therefor, duly endorsed in blank in the case of Notes and accompanied by undated
stock powers duly executed in blank by such Pledgor in the case of Stock, or
such other instruments of transfer as are acceptable to the Pledgee; and
(iii) assigns, transfers, hypothecates, mortgages, charges and sets over to the
Pledgee all of such Pledgor's right, title and interest in and to such
Securities (and in and to all certificates or instruments evidencing such
Securities), to be held by the Pledgee, upon the terms and conditions set forth
in this Agreement.
3.2. Subsequently Acquired Securities. If any Pledgor shall acquire
--------------------------------
(by purchase, stock dividend or otherwise) any additional Securities at any time
or from time to time after the date hereof, such Pledgor will forthwith pledge
and deposit such Securities (or certificates or instruments representing such
Securities) as security with the Pledgee and deliver to the Pledgee certificates
therefor or instruments thereof, duly endorsed in blank in the case of Notes and
accompanied by undated stock powers duly executed in blank in the case of Stock,
or such other instruments of transfer as are acceptable to the Pledgee, and will
promptly thereafter deliver to the Pledgee a certificate executed by any
Authorized Officer of such Pledgor describing such Securities and certifying
that the same have been duly pledged with the Pledgee hereunder. Subject to the
last sentence of Section 2 hereof, no Pledgor shall be required at any time to
pledge hereunder (x) any Stock which is more than 65% of the total combined
voting
<PAGE>
EXHIBIT 4.6
Page 5
power of all classes of capital stock of any Foreign Corporation entitled to
vote or (y) any promissory notes (including Intercompany Notes) issued to such
Pledgor by any Subsidiary of such Pledgor which is a Foreign Corporation.
3.3. Uncertificated Securities. Notwithstanding anything to the
-------------------------
contrary contained in Sections 3.1 and 3.2 hereof, if any Securities (whether
now owned or hereafter acquired) are uncertificated securities, the respective
Pledgor shall promptly notify the Pledgee thereof, and shall promptly take all
actions required to perfect the security interest of the Pledgee under
applicable law (including, in any event, under Sections 8-313 and 8-321 of the
New York UCC, if applicable). Each Pledgor further agrees to take such actions
as the Pledgee deems reasonably necessary or desirable to effect the foregoing
and to permit the Pledgee to exercise any of its rights and remedies hereunder,
and agrees to provide an opinion of counsel reasonably satisfactory to the
Pledgee with respect to any such pledge of uncertificated Securities promptly
upon request of the Pledgee.
3.4 Definition of Pledged Stock, Pledged Notes, Pledged Securities
--------------------------------------------------------------
and Collateral. All Stock at any time pledged or required to be pledged
- --------------
hereunder is hereinafter called the "Pledged Stock," all Notes at any time
pledged or required to be pledged hereunder are hereinafter called the "Pledged
Notes," all of the Pledged Stock and Pledged Notes together are hereinafter
called the "Pledged Securities," which together with all dividends and interest
thereon, as the case may be, and all proceeds thereof, including any securities
and moneys received and at the time held by the Pledgee hereunder, is
hereinafter called the "Collateral."
4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee shall
have the right to appoint one or more sub-agents for the purpose of retaining
physical possession of the Pledged Securities, which may be held (in the
discretion of the Pledgee) in the name of such Pledgor, endorsed or assigned in
blank or in favor of the Pledgee or any nominee or nominees of the Pledgee or a
sub-agent appointed by the Pledgee. The Pledgee agrees to promptly notify the
relevant Pledgor after the appointment of any sub-agent; provided, however, that
-------- -------
the failure to give such notice shall not affect the validity of such
appointment.
5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until
(i) an Event of Default shall have occurred and be continuing and (ii) written
notice thereof shall have been given by the Pledgee to the relevant Pledgor
(provided, that if an Event of Default specified in Section 9.05 of the Credit
--------
Agreement shall occur, no such notice shall be required), each Pledgor shall be
entitled to exercise any and all voting and other consensual rights pertaining
to the Pledged Securities and to give all consents, waivers or ratifications in
respect thereof; provided, that no vote shall be cast or any consent, waiver or
--------
ratification given or any action taken which would violate or be inconsistent
with any of the terms of this
<PAGE>
EXHIBIT 4.6
Page 6
Agreement, any other Credit Document or any Interest Rate Protection Agreement
or Other Hedging Agreement (collectively, the "Secured Debt Agreements"), or
which would have the effect of impairing the position or interests of the
Pledgee or any other Secured Creditor, except to the extent such violation,
inconsistency or impairment shall be waived in accordance with the terms of
Section 20 hereof. All such rights of such Pledgor to vote and to give consents,
waivers and ratifications shall cease in case an Event of Default shall occur
and be continuing, and Section 7 hereof shall become applicable.
6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless an Event of Default
shall have occurred and be continuing, all cash dividends payable in respect of
the Pledged Stock and all payments in respect of the Pledged Notes shall be paid
to the respective Pledgor; provided, that all cash dividends payable in respect
--------
of the Pledged Stock which are determined by the Pledgee to represent in whole
or in part an extraordinary, liquidating or other distribution in return of
capital shall be paid, to the extent so determined to represent an
extraordinary, liquidating or other distribution in return of capital, to the
Pledgee and retained by it as part of the Collateral. Subject to the last
sentence of Section 3.2 hereof, Pledgee shall also be entitled to receive
directly, and to retain as part of the Collateral:
(i) all other or additional stock or other securities or property
(other than cash) paid or distributed by way of dividend or otherwise in
respect of the Pledged Stock;
(ii) all other or additional stock or other securities or property
(including cash) paid or distributed in respect of the Pledged Stock by way
of stock-split, spin-off, split-up, reclassification, combination of shares
or similar rearrangement; and
(iii) all other or additional stock or other securities or property
(including cash) which may be paid in respect of the Collateral by reason
of any consolidation, merger, exchange of stock, conveyance of assets,
liquidation or similar corporate reorganization.
7. REMEDIES IN CASE OF EVENT OF DEFAULT. In case an Event of Default
shall have occurred and be continuing, the Pledgee shall be entitled to exercise
all of the rights, powers and remedies (whether vested in it by this Agreement
or by any other Secured Debt Agreement or by law) for the protection and
enforcement of its rights in respect of the Collateral, and the Pledgee shall be
entitled, without limitation, to exercise the following rights, which each
Pledgor hereby agrees to be commercially reasonable:
(i) to receive all amounts payable in respect of the Collateral
payable to such Pledgor under Section 6 hereof;
<PAGE>
EXHIBIT 4.6
Page 7
(ii) to transfer all or any part of the Pledged Securities into the
Pledgee's name or the name of its nominee or nominees (the Pledgee agrees
to promptly notify the relevant Pledgor after such transfer; provided,
--------
however, that the failure to give such notice shall not affect
-------
the validity of such transfer);
(iii) to accelerate any Pledged Note which may be accelerated in
accordance with its terms, and take any other action to collect upon any
Pledged Note (including, without limitation, to make any demand for payment
thereon);
(iv) subject to the giving of written notice to the relevant Pledgor
in accordance with clause (ii) of Section 5 hereof (to the extent required
by such Section 5), to vote all or any part of the Pledged Stock (whether
or not transferred into the name of the Pledgee) and give all consents,
waivers and ratifications in respect of the Collateral and otherwise act
with respect thereto as though it were the outright owner thereof (each
Pledgor hereby irrevocably constituting and appointing the Pledgee the
proxy and attorney-in-fact of such Pledgor, with full power of substitution
to do so); and
(v) at any time or from time to time to sell, assign and deliver, or
grant options to purchase, all or any part of the Collateral, or any
interest therein, at any public or private sale, without demand of
performance, advertisement or notice of intention to sell or of the time or
place of sale or adjournment thereof or to redeem or otherwise (all of
which are hereby waived by each Pledgor), for cash, on credit or for other
property, for immediate or future delivery without any assumption of credit
risk, and for such price or prices and on such terms as the Pledgee in its
absolute discretion may determine; provided, that at least 10 days' written
--------
notice of the time and place of any such sale shall be given to such
Pledgor. Each Pledgor hereby waives and releases to the fullest extent
permitted by law any right or equity of redemption with respect to the
Collateral, whether before or after sale hereunder, and all rights, if any,
of marshalling the Collateral and any other security for the Obligations or
otherwise. At any such sale, unless prohibited by applicable law, the
Pledgee on behalf of the Secured Creditors may bid for and purchase all or
any part of the Collateral so sold free from any such right or equity of
redemption. Neither the Pledgee nor any Secured Creditor shall be liable
for failure to collect or realize upon any or all of the Collateral or for
any delay in so doing nor shall any of them be under any obligation to take
any action whatsoever with regard thereto.
8. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of the
Pledgee provided for in this Agreement or any other Secured Debt Agreement or
now or hereafter existing at law or in equity or by statute shall be cumulative
and concurrent and shall be in addition to every other such right, power or
remedy. The exercise or beginning of the
<PAGE>
EXHIBIT 4.6
Page 8
exercise by the Pledgee or any other Secured Creditor of any one or more of the
rights, powers or remedies provided for in this Agreement or any other Secured
Debt Agreement or now or hereafter existing at law or in equity or by statute or
otherwise shall not preclude the simultaneous or later exercise by the Pledgee
or any other Secured Creditor of all such other rights, powers or remedies, and
no failure or delay on the part of the Pledgee or any other Secured Creditor to
exercise any such right, power or remedy shall operate as a waiver thereof. The
Secured Creditors agree that this Agreement may be enforced only by the action
of the Agent or the Pledgee, in each case acting upon the instructions of the
Required Banks (or, after the date on which all Credit Document Obligations have
been paid in full, the holders of at least the majority of the outstanding Other
Obligations) and that no other Secured Creditor shall have any right
individually to seek to enforce or to enforce this Agreement or to realize upon
the security to be granted hereby, it being understood and agreed that such
rights and remedies may be exercised by the Agent or the Pledgee or the holders
of at least a majority of the outstanding Other Obligations, as the case may be,
for the benefit of the Secured Creditors upon the terms of this Agreement.
9. APPLICATION OF PROCEEDS. (a) All moneys collected by the Pledgee
upon any sale or other disposition of the Collateral pursuant to the terms of
this Agreement, together with all other moneys received by the Pledgee
hereunder, shall be applied in the manner provided in the Security Agreement.
(b) It is understood and agreed that the Pledgors shall remain
jointly and severally liable to the extent of any deficiency between the amount
of the proceeds of the Collateral hereunder and the aggregate amount of the
Obligations.
10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the
Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), the receipt of the Pledgee or the
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold, and such purchaser or purchasers shall not
be obligated to see to the application of any part of the purchase money paid
over to the Pledgee or such officer or be answerable in any way for the
misapplication or nonapplication thereof.
11. INDEMNITY. Each Pledgor jointly and severally agrees (i) to
indemnify and hold harmless the Pledgee in such capacity and each other Secured
Creditor from and against any and all claims, demands, losses, judgments and
liabilities of whatsoever kind or nature, and (ii) to reimburse the Pledgee and
each other Secured Creditor for all costs and expenses, including attorneys'
fees, growing out of or resulting from this Agreement or the exercise by the
Pledgee of any right or remedy granted to it hereunder or under any other
Secured Debt Agreement except, with respect to clauses (i) and (ii) above, for
those arising
<PAGE>
Exhibit 4.6
Page 9
from the Pledgee's or such other Secured Creditor's gross negligence or willful
misconduct. In no event shall the Pledgee be liable, in the absence of gross
negligence or willful misconduct on its part, for any matter or thing in
connection with this Agreement other than to account for moneys actually
received by it in accordance with the terms hereof. If and to the extent that
the obligations of the Pledgors under this Section 11 are unenforceable for any
reason, each Pledgor hereby agrees to make the maximum contribution to the
payment and satisfaction of such obligations which is permissible under
applicable law.
12. FURTHER ASSURANCES. Each Pledgor agrees that it will join with
the Pledgee in executing and, at such Pledgor's own expense, file and refile
under the applicable UCC or appropriate local equivalent, such financing
statements, continuation statements and other documents in such offices as the
Pledgee may deem reasonably necessary or appropriate and wherever required or
permitted by law in order to perfect and preserve the Pledgee's security
interest in the Collateral and hereby authorizes the Pledgee to file financing
statements and amendments thereto relative to all or any part of the Collateral
without the signature of such Pledgor where permitted by law, and agrees to do
such further acts and things and to execute and deliver to the Pledgee such
additional conveyances, assignments, agreements and instruments as the Pledgee
may reasonably require or deem advisable to carry into effect the purposes of
this Agreement or to further assure and confirm unto the Pledgee its rights,
powers and remedies hereunder.
13. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance with
this Agreement all items of the Collateral at any time received under this
Agreement. It is expressly understood and agreed that the obligations of the
Pledgee as holder of the Collateral and interests therein and with respect to
the disposition thereof, and otherwise under this Agreement, are only those
expressly set forth in this Agreement. The Pledgee shall act hereunder on the
terms and conditions set forth herein and in Section 11 of the Credit Agreement.
14. TRANSFER BY PLEDGORS. Except for sales or dispositions of
Collateral permitted pursuant to the Credit Agreement, no Pledgor will sell or
otherwise dispose of, grant any option with respect to, or mortgage, pledge or
otherwise encumber any of the Collateral or any interest therein (except in
accordance with the terms of this Agreement).
15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGOR. Each
Pledgor represents, warrants and covenants that (i) it is the legal, record and
beneficial owner of, and has good and marketable title to, all Securities
pledged by it hereunder, subject to no pledge, lien, mortgage, hypothecation,
security interest, charge, option or other encumbrance whatsoever, except the
liens and security interests created by this Agreement and liens permitted under
clauses (a) and (e) of Section 8.03 of the Credit
<PAGE>
Exhibit 4.6
Page 10
Agreement; (ii) it has full power, authority and legal right to pledge all the
Securities pledged by it pursuant to this Agreement; (iii) this Agreement has
been duly authorized, executed and delivered by such Pledgor and constitutes a
legal, valid and binding obligation of such Pledgor enforceable in accordance
with its terms, except to the extent that the enforceability hereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally and by equitable
principles (regardless of whether enforcement is sought in equity or at law);
(iv) no consent of any other party (including, without limitation, any
stockholder or creditor of such Pledgor or any of its Subsidiaries) and no
consent, license, permit, approval or authorization of, exemption by, notice or
report to, or registration, filing or declaration with, any governmental
authority is required to be obtained by such Pledgor in connection with the
execution, delivery or performance of this Agreement, or in connection with the
exercise of its rights and remedies pursuant to this Agreement, except as may be
required in connection with the disposition of the Securities by laws affecting
the offering and sale of securities generally; (v) the execution, delivery and
performance of this Agreement by such Pledgor does not violate any provision of
any applicable law or regulation or of any order, judgment, writ, award or
decree of any court, arbitrator or governmental authority, domestic or foreign,
or of the certificate of incorporation or by-laws of such Pledgor or of any
securities issued by such Pledgor or any of its Subsidiaries, or of any
mortgage, indenture, deed of trust, loan agreement, credit agreement or any
other agreement or material instrument to which such Pledgor or any of its
Subsidiaries is a party or which purports to be binding upon such Pledgor or any
of its Subsidiaries or upon any of their respective assets and will not result
in the creation or imposition of any lien or encumbrance on any of the assets of
such Pledgor or any of its Subsidiaries except as contemplated by this
Agreement; (vi) all the shares of Stock of Subsidiaries of Holdings have been
duly and validly issued, are fully paid and nonassessable; (vii) each of the
Pledged Notes constituting Intercompany Notes, when executed by the obligor
thereof, will be the legal, valid and binding obligation of such obligor,
enforceable in accordance with its terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and by equitable principles (regardless of whether enforcement is
sought in equity or at law); and (viii) the pledge and assignment of the
Securities pursuant to this Agreement, together with the delivery of the
Securities pursuant to this Agreement (which delivery has been made), creates a
valid and perfected first security interest in such Securities and the proceeds
thereof, subject to no prior lien or encumbrance or to any agreement purporting
to grant to any third party a lien or encumbrance on the property or assets of
such Pledgor which would include the Securities other than liens permitted under
clauses (a) and (e) of Section 8.03 of the Credit Agreement. Each Pledgor
covenants and agrees that it will defend the Pledgee's right, title and security
interest in and to the Securities and the proceeds thereof against the claims
and demands of all persons whomsoever; and such Pledgor covenants and agrees
that it will have like title to and right to pledge any other property at any
time hereafter pledged to the Pledgee as Collateral hereunder and will likewise
defend
<PAGE>
Exhibit 4.6
Page 11
the right thereto and security interest therein of the Pledgee and the
other Secured Creditors.
16. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of each
Pledgor under this Agreement shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
suspended, discharged, terminated or otherwise affected by, any circumstance or
occurrence whatsoever, including, without limitation: (i) any renewal,
extension, amendment or modification of or addition or supplement to or deletion
from any Secured Debt Agreement or any other instrument or agreement referred to
therein, or any assignment or transfer of any thereof; (ii) any waiver, consent,
extension, indulgence or other action or inaction under or in respect of any
such agreement or instrument or this Agreement; (iii) any furnishing of any
additional security to the Pledgee or its assignee or any acceptance thereof or
any release of any security by the Pledgee or its assignee; (iv) any limitation
on any party's liability or obligations under any such instrument or agreement
or any invalidity or unenforceability, in whole or in part, of any such
instrument or agreement or any term thereof; or (v) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation or other like
proceeding relating to such Pledgor or any Subsidiary of such Pledgor, or any
action taken with respect to this Agreement by any trustee or receiver, or by
any court, in any such proceeding, whether or not such Pledgor shall have notice
or knowledge of any of the foregoing.
17. REGISTRATION, ETC. (a) If an Event of Default shall have occurred
and be continuing and any Pledgor shall have received from the Pledgee a written
request or requests that such Pledgor cause any registration, qualification or
compliance under any Federal or state securities law or laws to be effected with
respect to all or any part of the Pledged Stock, such Pledgor as soon as
practicable and at its expense will use its reasonable efforts to cause such
registration to be effected (and be kept effective) and will use its reasonable
efforts to cause such qualification and compliance to be effected (and be kept
effective) as may be so requested and as would permit or facilitate the sale and
distribution of such Pledged Stock, including, without limitation, registration
under the Securities Act of 1933 as then in effect (or any similar statute then
in effect), appropriate qualifications under applicable blue sky or other state
securities laws and appropriate compliance with any other government
requirements; provided, that the Pledgee shall furnish to such Pledgor such
--------
information regarding the Pledgee as such Pledgor may request in writing and as
shall be required in connection with any such registration, qualification or
compliance. Such Pledgor will cause the Pledgee to be kept reasonably advised in
writing as to the progress of each such registration, qualification or
compliance and as to the completion thereof, will furnish to the Pledgee such
number of prospectuses, offering circulars or other documents incident thereto
as the Pledgee from time to time may reasonably request, and will indemnify the
Pledgee, each other Secured Creditor and all others participating in the
distribution of the Pledged Stock against all claims, losses, damages and
liabilities caused by any untrue statement (or alleged
<PAGE>
Exhibit 4.6
Page 12
untrue statement) of a material fact contained therein (or in any related
registration statement, notification or the like) or by any omission (or alleged
omission) to state therein (or in any related registration statement,
notification or the like) a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same may have been caused by an untrue statement or omission based upon
information furnished in writing to such Pledgor by the Pledgee or such other
Secured Creditor expressly for use therein.
(b) If at any time when the Pledgee shall determine to exercise its
right to sell all or any part of the Pledged Securities pursuant to Section 7
hereof, such Pledged Securities or the part thereof to be sold shall not, for
any reason whatsoever, be effectively registered under the Securities Act of
1933, as then in effect, the Pledgee may, in its sole and absolute discretion,
sell such Pledged Securities or part thereof by private sale in such manner and
under such circumstances as the Pledgee may deem necessary or advisable in order
that such sale may legally be effected without such registration; provided, that
--------
at least 10 days' notice of the time and place of any such sale shall be given
to such Pledgor. Without limiting the generality of the foregoing, in any such
event the Pledgee, in its sole and absolute discretion: (i) may proceed to make
such private sale notwithstanding that a registration statement for the purpose
of registering such Pledged Securities or part thereof shall have been filed
under such Securities Act; (ii) may approach and negotiate with a single
possible purchaser to effect such sale; and (iii) may restrict such sale to a
purchaser who will represent and agree that such purchaser is purchasing for its
own account, for investment, and not with a view to the distribution or sale of
such Pledged Securities or part thereof. In the event of any such sale, the
Pledgee shall incur no responsibility or liability for selling all or any part
of the Pledged Securities at a price which the Pledgee, in its sole and absolute
discretion, may in good faith deem reasonable under the circumstances,
notwithstanding the possibility that a substantially higher price might be
realized if the sale were deferred until after registration as aforesaid.
18. TERMINATION, RELEASE. (a) After the Termination Date (as
defined below), this Agreement shall terminate (provided that all indemnities
set forth herein including, without limitation, in Section 11 hereof shall
survive any such termination) and the Pledgee, at the request and expense of the
respective Pledgor, will promptly execute and deliver to such Pledgor a proper
instrument or instruments acknowledging the satisfaction and termination of this
Agreement, and will duly release from the security interest created hereby and
assign, transfer and deliver to such Pledgor (without recourse and without any
representation or warranty) such of the Collateral as may be in the possession
of the Pledgee and as has not theretofore been sold or otherwise applied or
released pursuant to this Agreement. As used in this Agreement, "Termination
Date" shall mean the date upon which the Total Commitment and all Interest Rate
Protection Agreements or Other Hedging Agreements have been terminated, no Note
(as defined in the Credit Agreement) or Letter of
<PAGE>
EXHIBIT 4.6
Page 13
Credit is outstanding (other than Letters of Credit, together with all Fees that
have accrued and will accrue thereon through the stated termination date of such
Letters of Credit, which have been supported in a manner satisfactory to the
Letter of Credit Issuer in its sole and absolute discretion) and all other
Obligations (other than indemnities described in Section 11 hereof and in
Section 12.13 of the Credit Agreement which are not then due and payable) have
been paid in full.
(b) In the event that any part of the Collateral is sold or otherwise
disposed of in connection with a sale or other disposition permitted by Section
8.02 of the Credit Agreement or is otherwise released at the direction of the
Required Banks (or all the Banks if required by Section 12.12 of the Credit
Agreement), the Pledgee, at the request and expense of such Pledgor will duly
release from the security interest created hereby and assign, transfer and
deliver to such Pledgor (without recourse and without any representation or
warranty) such of the Collateral as is then being (or has been) so sold or
released and as may be in possession of the Pledgee and has not theretofore been
released pursuant to this Agreement.
(c) At any time that a Pledgor desires that Collateral be released as
provided in the foregoing Section 18(a) or (b), it shall deliver to the Pledgee
a certificate signed by an Authorized Officer of such Pledgor stating that the
release of the respective Collateral is permitted pursuant to Section 18(a) or
(b).
19. NOTICES, ETC. All notices and other communications hereunder
shall be in writing and shall be delivered or mailed by first class mail,
postage prepaid, addressed:
(a) if to any Pledgor, at its address set forth opposite its
signature below;
(b) if to the Pledgee, at:
Bankers Trust Company
One Bankers Trust Plaza
New York, New York 10006
Attention: Mary Kay Coyle
Telephone No.: (212) 250-9094
Telecopier No.: (212) 250-7218
(c) if to any Bank (other than the Pledgee), at such address as such
Bank shall have specified in the Credit Agreement;
(d) if to any Other Creditor, at such address as such Other Creditor
shall have specified in writing to each Pledgor and the Pledgee;
<PAGE>
EXHIBIT 4.6
Page 14
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
20. WAIVER; AMENDMENT. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by each Pledgor directly affected thereby and the
Pledgee (with the written consent of either (x) the Required Banks (or all the
Banks if required by Section 12.12 of the Credit Agreement) at all times prior
to the time on which all Credit Document Obligations have been paid in full or
(y) the holders of at least a majority of the outstanding Other Obligations at
all times after the time on which all Credit Document Obligations have been paid
in full); provided, that any change, waiver, modification or variance affecting
--------
the rights and benefits of a single Class (as defined below) of Secured
Creditors (and not all Secured Creditors in a like or similar manner) shall
require the written consent of the Requisite Creditors (as defined below) of
such Class. For the purpose of this Agreement, the term "Class" shall mean each
class of Secured Creditors, i.e., whether (i) the Bank Creditors as holders of
----
the Credit Document Obligations or (ii) the Other Creditors as holders of the
Other Obligations. For the purpose of this Agreement, the term "Requisite
Creditors" of any Class shall mean each of (i) with respect to the Credit
Document Obligations, the Required Banks and (ii) with respect to the Other
Obligations, the holders of at least a majority of all obligations outstanding
from time to time under the Interest Rate Protection Agreements or Other Hedging
Agreements.
21. MISCELLANEOUS. (a) This Agreement shall be binding upon the
successors and assigns of each Pledgor and shall inure to the benefit of and be
enforceable by the Pledgee and its successors and assigns. THIS AGREEMENT SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK. The headings in this Agreement are for purposes of reference
only and shall not limit or define the meaning hereof. This Agreement may be
executed in any number of counterparts, each of which shall be an original, but
all of which shall constitute one instrument.
(b) Notwithstanding anything contained herein to the contrary, it is
understood and agreed that with respect to uncertificated Securities of any
Foreign Corporation directly owned by any Pledgor, no Pledgor shall be required
to perfect the Pledgee's security interest in such uncertificated Securities
until such time as the Credit Agreement shall otherwise provide.
(c) A simplified version of this Agreement for the purposes of
pledging the shares of Wesley-Jessen S.p.A., an Italian corporation, is attached
as Exhibit A hereto (the "Unilateral Deed of Pledge") and shall be executed by
the Borrower simultaneously with the signing of this Agreement and notarized and
legalized by means of the apostille thereto pursuant
<PAGE>
EXHIBIT 4.6
Page 15
to The Hague Convention of October 5, 1961. The Unilateral Deed of Pledge shall
not supersede in any fashion the contents of this Agreement. In case of
discrepancy, this Agreement shall prevail over the Unilateral Deed of Pledge.
22. ADDITIONAL PLEDGORS. It is understood and agreed that any
Subsidiary of Holdings that is required to execute a counterpart of this
Agreement after the date hereof pursuant to Sections 7.15 and/or 8.14 of the
Credit Agreement shall automatically become a Pledgor hereunder by executing a
counterpart hereof and delivering the same to the Pledgee.
* * *
<PAGE>
IN WITNESS WHEREOF, each Pledgor and the Pledgee have caused this
Agreement to be executed by their duly elected officers duly authorized as of
the date first above written.
Address: WESLEY-JESSEN HOLDING, INC.,
333 East Howard Avenue as a Pledgor
Des Plaines, Illinois 60018
Attention: Edward Kelley
By Edward J. Kelley
----------------------------
Title: Chief Financial Officer
Address: WESLEY-JESSEN CORPORATION,
333 East Howard Avenue as a Pledgor
Des Plaines, Illinois 60018
Attention: Edward Kelley
By Gerald B. Sweeney
----------------------------
Title: Assistant Secretary
Address: PILKINGTON BARNES HIND, INC. (named
333 East Howard Avenue to be changed to PBH, Inc),
Des Plaines, Illinois 60018 as a Pledgor
Attention: Edward Kelley
By Gerald B. Sweeney
----------------------------
Title: Assistant Secretary
Address: PILKINGTON BARNES HIND
333 East Howard Avenue INTERNATIONAL, INC. (name to be
Des Plaines, Illinois 60018 changed to PBH International, Inc.),
Attention: Edward Kelley as a Pledgor
By Gerald B. Sweeney
----------------------------
Title: Assistant Secretary
<PAGE>
Address: BARNES-HIND INTERNATIONAL
333 East Howard Avenue INC.,
Des Plaines, Illinois 60018 as a Pledgor
Attention: Edward Kelley
By /s/ Gerald B. Sweeney
----------------------------
Title: Assistant Secretary
Address: WESLEY-JESSEN (PUERTO RICO),
333 East Howard Avenue INC.,
Des Plaines, Illinois 60018 as a Pledgor
Attention: Edward Kelley
By /s/ Gerald B. Sweeney
----------------------------
Title: Assistant Secretary
BANKERS TRUST COMPANY,
as Collateral Agent and Pledgee
By /s/ Mary Kay Coyle
-----------------------------------
Title: Managing Director
<PAGE>
ANNEX A
to
PLEDGE AGREEMENT
----------------
LIST OF SUBSIDIARIES
--------------------
[TO BE PROVIDED BY PLEDGORS]
<PAGE>
ANNEX B
to
PLEDGE AGREEMENT
----------------
LIST OF STOCK
-------------
[TO BE PROVIDED BY PLEDGORS]
<PAGE>
ANNEX C
to
PLEDGE AGREEMENT
----------------
LIST OF NOTES
-------------
[TO BE PROVIDED BY PLEDGORS]
<PAGE>
ANNEX D
to
PLEDGE AGREEMENT
----------------
LIST OF EXCLUDED NOTES
----------------------
<PAGE>
EXHIBIT 4.7
-----------
SUBSIDIARY GUARANTY
-------------------
GUARANTY, dated as of October 2, 1996 (as amended, modified or supplemented
from time to time, this "Guaranty"), made by each of the undersigned (each, a
"Guarantor" and, together with any other entity that becomes a party hereto
pursuant to Section 26 hereof, the "Guarantors"). Except as otherwise defined
herein, terms used herein and defined in the Credit Agreement (as defined below)
shall be used herein as therein defined.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Wesley-Jessen Holding, Inc. ("Holdings"), Wesley-Jessen
Corporation (the "Borrower"), the financial institutions from time to time party
thereto (the "Banks"), and Bankers Trust Company, as Agent (together with any
successor agent, the "Agent"), have entered into a Credit Agreement, dated as of
October 2, 1996 (as amended, modified or supplemented from time to time, the
"Credit Agreement"), providing for the making of Loans to the Borrower and the
issuance of, and participation in, Letters of Credit for the account of the
Borrower, all as contemplated therein (the Banks, the Agent and the Collateral
Agent are herein called the "Bank Creditors");
WHEREAS, the Borrower may from time to time be party to one or more (i)
interest rate agreements, interest rate cap agreements, interest rate collar
agreements or other similar agreements or arrangements, (ii) foreign exchange
contracts, currency swap agreements or similar agreements or arrangements
designed to protect against the fluctuations in currency values and\or (iii)
other types of hedging agreements from time to time (each such agreement or
arrangement with an Other Creditor (as hereinafter defined), an "Interest Rate
Protection Agreement or Other Hedging Agreement"), with a Bank or an affiliate
of a Bank (each such Bank or affiliate, even if the respective Bank subsequently
ceases to be a Bank under the Credit Agreement for any reason, together with
such Bank's or affiliate's successors and assigns, collectively, the "Other
Creditors," and together with the Bank Creditors, are herein called the
"Creditors");
WHEREAS, each Guarantor is a Subsidiary of the Borrower;
WHEREAS, it is a condition to the making of Loans under the Credit
Agreement that each Guarantor shall have executed and delivered this Guaranty;
and
<PAGE>
WHEREAS, each Guarantor will obtain benefits from the incurrence of Loans
by the Borrower under the Credit Agreement and the entering into of Interest
Rate Protection Agreements or Other Hedging Agreements and, accordingly, desires
to execute this Guaranty in order to satisfy the conditions described in the
preceding paragraph and to induce the Banks to make Loans to the Borrower and
Other Creditors to enter into Interest Rate Protection Agreements or Other
Hedging Agreements with the Borrower;
NOW, THEREFORE, in consideration of the foregoing and other benefits
accruing to each Guarantor, the receipt and sufficiency of which are hereby
acknowledged, each Guarantor hereby makes the following representations and
warranties to the Creditors and hereby covenants and agrees with each Creditor
as follows:
1. Each Guarantor, jointly and severally, irrevocably and unconditionally
guarantees: (i) to the Bank Creditors the full and prompt payment when due
(whether at the stated maturity, by acceleration or otherwise) of (x) the
principal of and interest on the Notes issued by, and the Loans made to, the
Borrower under the Credit Agreement and all reimbursement obligations and Unpaid
Drawings with respect to Letters of Credit and (y) all other obligations
(including obligations which, but for the automatic stay under Section 362(a) of
the Bankruptcy Code, would become due) and liabilities owing by the Borrower to
the Bank Creditors under the Credit Agreement (including, without limitation,
indemnities, Fees and interest thereon) and the other Credit Documents to which
the Borrower is a party, whether now existing or hereafter incurred under,
arising out of or in connection with the Credit Agreement or any such other
Credit Document and the due performance and compliance with the terms of the
Credit Documents by the Borrower (all such principal, interest, liabilities and
obligations under this clause (i), except to the extent consisting of
obligations or liabilities with respect to Interest Rate Protection Agreements
or Other Hedging Agreements, being herein collectively called the "Credit
Document Obligations"); and (ii) to each Other Creditor the full and prompt
payment when due (whether at the stated maturity, by acceleration or otherwise)
of all obligations (including obligations which, but for the automatic stay
under Section 362(a) of the Bankruptcy Code, would become due) and liabilities
owing by the Borrower under any Interest Rate Protection Agreements or Other
Hedging Agreements, whether now in existence or hereafter arising, and the due
performance and compliance by the Borrower with all terms, conditions and
agreements contained therein (all such obligations and liabilities being herein
collectively called the "Other Obligations", and together with the Credit
Document Obligations are herein collectively called the "Guaranteed
Obligations"), provided that the maximum amount payable by each Guarantor
hereunder shall at no time exceed the Maximum Amount (as hereinafter defined) of
such Guarantor. As used herein, "Maximum Amount" of any Guarantor means an
amount equal to 95% of the amount by which (i) the present fair saleable value
of such Guarantor's assets exceeds (ii) the amount reasonably expected to
come due in respect of all liabilities (including, without limitation,
contingent liabilities), other than liabilities (contingent or otherwise) of
such Guarantor hereunder, in each case determined on
-2-
<PAGE>
the Initial Borrowing Date or on the day any demand is made under this Guaranty,
whichever date results in a higher Maximum Amount. Subject to the proviso in the
second preceding sentence, each Guarantor understands, agrees and confirms that
the Creditors may enforce this Guaranty up to the full amount of the Guaranteed
Obligations against each Guarantor without proceeding against any other
Guarantor, the Borrower, against any security for the Guaranteed Obligations, or
under any other guaranty covering all or a portion of the Guaranteed
Obligations. All payments by each Guarantor under this Guaranty shall be made on
the same basis as payments by the Borrower are made under Sections 4.03 and 4.04
of the Credit Agreement.
2. Additionally, each Guarantor, jointly and severally, unconditionally
and irrevocably, guarantees the payment of any and all Guaranteed Obligations of
the Borrower to the Creditors whether or not due or payable by the Borrower upon
the occurrence in respect of the Borrower of any of the events specified in
Section 9.05 of the Credit Agreement, and unconditionally and irrevocably,
jointly and severally, promises to pay such Guaranteed Obligations to the
Creditors, or order, on demand, in lawful money of the United States.
3. The liability of each Guarantor hereunder is exclusive and independent
of any security for or other guaranty of the Guaranteed Obligations of the
Borrower whether executed by such Guarantor, any other Guarantor, any other
guarantor or by any other party, and the liability of each Guarantor hereunder
shall not be affected or impaired by (a) any direction as to application of
payment by the Borrower or by any other party, (b) any other continuing or other
guaranty, undertaking or maximum liability of a guarantor or of any other party
as to the Guaranteed Obligations of the Borrower, (c) any payment on or in
reduction of any such other guaranty or undertaking, (d) any dissolution,
termination or increase, decrease or change in personnel by the Borrower or (e)
any payment made to any Creditor on the Guaranteed Obligations which any
Creditor repays the Borrower pursuant to court order in any bankruptcy,
reorganization, arrangement, moratorium or other debtor relief proceeding, and
each Guarantor waives any right to the deferral or modification of its
obligations hereunder by reason of any such proceeding.
4. The obligations of each Guarantor hereunder are independent of the
obligations of any other Guarantor, any other guarantor or the Borrower, and a
separate action or actions may be brought and prosecuted against each Guarantor
whether or not action is brought against any other Guarantor, any other
guarantor or the Borrower and whether or not any other Guarantor, any other
guarantor of the Borrower or the Borrower be joined in any such action or
actions. Each Guarantor waives, to the fullest extent permitted by law, the
benefit of any statute of limitations affecting its liability hereunder
or the enforcement thereof. Any payment by the Borrower or other circumstance
which operates to toll any statute of limitations as to the Borrower shall
operate to toll the statute of limitations as to each Guarantor.
5. Each Guarantor hereby waives (to the fullest extent permitted by
applicable law) notice of acceptance of this Guaranty and notice of any
liability to which it may apply, and
-3-
<PAGE>
waives promptness, diligence, presentment, demand of payment, protest, notice of
dishonor or nonpayment of any such liabilities, suit or taking of other action
by the Agent or any other Creditor against, and any other notice to, any party
liable thereon (including such Guarantor or any other guarantor or the
Borrower).
6. Any Creditor may (except as shall be required by applicable
statute and cannot be waived) at any time and from time to time without the
consent of, or notice to, any Guarantor, without incurring responsibility to
such Guarantor, without impairing or releasing the obligations of such Guarantor
hereunder, upon or without any terms or conditions and in whole or in part:
(a) change the manner, place or terms of payment of, and/or change or
extend the time of payment of, renew, increase, accelerate or alter, any of
the Guaranteed Obligations, any security therefor, or any liability
incurred directly or indirectly in respect thereof, and the guaranty herein
made shall apply to the Guaranteed Obligations as so changed, extended,
renewed or altered;
(b) sell, exchange, release, surrender, realize upon or otherwise
deal with in any manner and in any order any property by whomsoever at any
time pledged or mortgaged to secure, or howsoever securing, the Guaranteed
Obligations or any liabilities (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and/or any offset
thereagainst;
(c) exercise or refrain from exercising any rights against the
Borrower or others or otherwise act or refrain from acting;
(d) settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to the payment of any
liability (whether due or not) of the Borrower to creditors of the
Borrower;
(e) apply any sums by whomsoever paid or howsoever realized to any
liability or liabilities of the Borrower to the Creditors regardless of
what liabilities of the Borrower remain unpaid;
(f) consent to or waive any breach of, or any act, omission or
default under, any of the Interest Rate Protection Agreements or Other
Hedging Agreements, the Credit Documents or any of the instruments or
agreements referred to therein, or otherwise amend, modify or supplement
any of the Interest Rate Protection Agreements or Other Hedging Agreements,
the Credit Documents or any of such other instruments or agreements; and/or
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(g) act or fail to act in any manner referred to in this Guaranty
which may deprive such Guarantor of its right to subrogation against the
Borrower to recover full indemnity for any payments made pursuant to this
Guaranty.
7. No invalidity, irregularity or unenforceability of all or any part
of the Guaranteed Obligations or of any security therefor shall affect, impair
or be a defense to this Guaranty, and this Guaranty shall be primary, absolute
and unconditional notwithstanding the occurrence of any event or the existence
of any other circumstances which might constitute a legal or equitable discharge
of a surety or guarantor except payment in full of the Guaranteed Obligations.
8. This Guaranty is a continuing one and all liabilities to which it
applies or may apply under the terms hereof shall be conclusively presumed to
have been created in reliance hereon. No failure or delay on the part of any
Creditor in exercising any right, power or privilege hereunder shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, power
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
expressly specified are cumulative and not exclusive of any rights or remedies
which any Creditor would otherwise have. No notice to or demand on any
Guarantor in any case shall entitle such Guarantor to any other further notice
or demand in similar or other circumstances or constitute a waiver of the rights
of any Creditor to any other or further action in any circumstances without
notice or demand. It is not necessary for any Creditor to inquire into the
capacity or powers of the Borrower or any of its Subsidiaries or the officers,
directors, partners or agents acting or purporting to act on its behalf, and any
indebtedness made or created in reliance upon the professed exercise of such
powers shall be guaranteed hereunder.
9. Any indebtedness of the Borrower now or hereafter held by any
Guarantor is hereby subordinated to the indebtedness of the Borrower to the
Creditors; and such indebtedness of the Borrower to any Guarantor, if the Agent,
after an Event of Default has occurred and is continuing, so requests, shall be
collected, enforced and received by such Guarantor as trustee for the Creditors
and be paid over to the Creditors on account of the indebtedness of the Borrower
to the Creditors, but without affecting or impairing in any manner the liability
of such Guarantor under the other provisions of this Guaranty. Prior to the
transfer by any Guarantor of any note or negotiable instrument evidencing any
indebtedness of the Borrower to such Guarantor, such Guarantor shall mark such
note or negotiable instrument with a legend that the same is subject to this
subordination. Without limiting the generality of the foregoing, each Guarantor
hereby agrees with the Guaranteed Creditors that it will not exercise any right
of subrogation which it may at any time otherwise have as a result of this
Guaranty (whether contractual, under Section 509 of the Bankruptcy Code or
otherwise) until all Guaranteed Obligations have been irrevocably paid in full
in cash.
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10. (a) Each Guarantor waives any right (except as shall be required by
applicable statute or law and cannot be waived) to require the Creditors to:
(i) proceed against the Borrower, any other Guarantor, any other guarantor of
the Borrower or any other party; (ii) proceed against or exhaust any security
held from the Borrower, any other Guarantor, any other guarantor of the Borrower
or any other party; or (iii) pursue any other remedy in the Creditors' power
whatsoever. Each Guarantor waives any (to the fullest extent permitted by
applicable law) defense based on or arising out of any defense of the Borrower,
any other Guarantor, any other guarantor of the Borrower or any other party
other than payment in full of the Guaranteed Obligations, including, without
limitation, any defense based on or arising out of the disability of the
Borrower, any other Guarantor, any other guarantor of the Borrower or any other
party, or the unenforceability of the Guaranteed Obligations or any part thereof
from any cause, or the cessation from any cause of the liability of the Borrower
other than payment in full of the Guaranteed Obligations. The Creditors may, at
their election, foreclose on any security held by the Agent, the Collateral
Agent or the other Creditors by one or more judicial or nonjudicial sales,
whether or not every aspect of any such sale is commercially reasonable (to the
extent such sale is permitted by applicable law), or exercise any other right or
remedy the Creditors may have against the Borrower or any other party, or any
security, without affecting or impairing in any way the liability of any
Guarantor hereunder except to the extent the Guaranteed Obligations have been
paid in full. Each Guarantor waives any defense arising out of any such
election by the Creditors, even though such election operates to impair or
extinguish any right of reimbursement or subrogation or other right or remedy of
such Guarantor against the Borrower or any other party or any security.
(b) Each Guarantor waives all presentments, demands for performance,
protests and notices, including, without limitation, notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this Guaranty,
and notices of the existence, creation or incurring of new or additional
indebtedness. Each Guarantor assumes all responsibility for being and keeping
itself informed of the Borrower's financial condition and assets, and of all
other circumstances bearing upon the risk of nonpayment of the Guaranteed
Obligations and the nature, scope and extent of the risks which such Guarantor
assumes and incurs hereunder, and agrees that the Creditors shall have no duty
to advise any Guarantor of information known to them regarding such
circumstances or risks.
(c) Each Guarantor understands, is aware and hereby acknowledges that
to the extent the Guaranteed Obligations are secured by real property located in
the State of California, such Guarantor shall be liable for the full amount of
its liability hereunder notwithstanding foreclosure on such real property by
trustee sale or any other reason impairing such Guarantor's or any Creditor's
right to proceed against any Credit Party. Each Guarantor hereby waives, to the
fullest extent permitted by law, all rights and benefits under Section 2809 of
the California Civil Code (or any similar law in any other jurisdiction)
purporting to reduce a guarantor's obligation in proportion to the principal
obligation. Each Guarantor hereby waives all rights and benefits under Section
580a of the California Code of Civil Procedure (or
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any similar law in any other jurisdiction) purporting to limit the amount of any
deficiency judgment which might be recoverable following the occurrence of a
trustee's sale under a deed of trust and all rights and benefits under Section
580b of the California Code of Civil Procedure (or any similar law in any other
jurisdiction) stating that no deficiency may be recovered on a real property
purchase money obligation. Each Guarantor further understands, is aware and
hereby acknowledges that if the Creditors elect to nonjudicially foreclose on
any real property security located in the State of California any right of
subrogation of such Guarantor against any Creditor may be impaired or
extinguished and that as a result of such impairment or extinguishment of
subrogation rights, such Guarantor may have a defense to a deficiency judgment
arising out of the operation of (i) Section 580d of the California Code of Civil
Procedure which states that no deficiency may be recovered on a note secured by
a deed of trust on real property in case such real property is sold under the
power of sale contained in such deed of trust, and (ii) related principles of
estoppel. To the fullest extent permitted by law, each Guarantor waives all
rights and benefits and any defense arising out of the operation of Section 580d
of the California Code of Civil Procedure and related principles of estoppel,
even though such election operates to impair or extinguish any right of
reimbursement or subrogation or other right or remedy of such Guarantor against
any Credit Party or any other party or any security. In addition, each Guarantor
hereby waives, to the fullest extent permitted by applicable law, without
limiting the generality of the foregoing or any other provision hereof, all
rights and benefits which might otherwise be available to such Guarantor under
Section 726 of the California Code of Civil Procedure and all rights and
benefits which might otherwise be available to such Guarantor under California
Civil Code Sections 2809, 2810, 2815, 2819, 2821, 2839, 2845, 2848, 2849, 2850,
2899 and 3433 (or any similar law in any other jurisdiction).
(d) Each Guarantor hereby further waives (to the fullest extent
permitted by applicable law): (i) all rights and defenses arising out of an
election of remedies by the Creditors, even though that election of remedies,
such as a nonjudicial foreclosure with respect to security for a Guaranteed
Obligation, has destroyed such Guarantor's rights of subrogation and
reimbursement against the principal by the operation of Section 580d of the
California Code of Civil Procedure or otherwise and (ii) such Guarantor's rights
of subrogation and reimbursement and any other rights and defenses available to
such Guarantor by reason of the California Civil Code Sections 2787 to 2855,
inclusive, including, without limitation, (x) any defenses such Guarantor may
have to the Guaranteed Obligations by reason of an election of remedies by the
Creditors and (y) any rights or defenses such Guarantor may have by reason of
protection afforded to the principal borrower with respect to the obligation so
guaranteed pursuant to the antideficiency or other laws of the State of
California limiting or discharging the borrower's indebtedness, including,
without limitation, California Code of Civil Procedure Sections 580a, 580b, 580d
or 726.
11. The Creditors agree that this Guaranty may be enforced only by the
action of the Agent or the Collateral Agent, in each case acting upon the
instructions of the Required
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Banks (or, after the date on which all Credit Document Obligations have been
paid in full, the holders of at least a majority of the outstanding Other
Obligations) and that no other Creditor shall have any right individually to
seek to enforce or to enforce this Guaranty or to realize upon the security to
be granted by the Security Documents, it being understood and agreed that such
rights and remedies may be exercised by the Agent or the Collateral Agent or the
holders of at least a majority of the outstanding Other Obligations, as the case
may be, for the benefit of the Creditors upon the terms of this Guaranty and the
Security Documents. The Creditors further agree that this Guaranty may not be
enforced against any director, officer, employee, or stockholder of any
Guarantor (except to the extent such stockholder is also a Guarantor hereunder).
12. In order to induce the Banks to make Loans and issue Letters of
Credit pursuant to the Credit Agreement, and in order to induce the Other
Creditors to execute, deliver and perform the Interest Rate Protection
Agreements or Other Hedging Agreements, each Guarantor represents, warrants and
covenants that:
(a) Such Guarantor (i) is a duly organized and validly existing
corporation and is in good standing under the laws of the jurisdiction of
its organization, and has the corporate power and authority to own its
property and assets and to transact the business in which it is engaged and
presently proposes to engage and (ii) is duly qualified and is authorized
to do business and is in good standing in all jurisdictions where it is
required to be so qualified and where the failure to be so qualified could
reasonably be expected to have a Material Adverse Effect.
(b) Such Guarantor has the corporate power and authority to execute,
deliver and carry out the terms and provisions of this Guaranty and each
other Credit Document to which it is a party and has taken all necessary
corporate action to authorize the execution, delivery and performance by it
of each such Credit Document. Such Guarantor has duly executed and
delivered this Guaranty and each other Credit Document to which it is a
party and each such Credit Document constitutes the legal, valid and
binding obligation of such Guarantor enforceable in accordance with its
terms, except to the extent that the enforceability hereof or thereof may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights generally and by
equitable principles (regardless of whether enforcement is sought in equity
or at law).
(c) Neither the execution, delivery or performance by such Guarantor
of this Guaranty or any other Credit Document to which it is a party, nor
compliance by it with the terms and provisions hereof or thereof (i) will
contravene any applicable provision of any law, statute, rule or
regulation, or any order, writ, injunction or decree of any court or
governmental instrumentality, (ii) will conflict or be inconsistent with or
result in any breach of, any of the terms, covenants, conditions or
provisions
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<PAGE>
of, or constitute a default under, or (other than pursuant to the Security
Documents) result in the creation or imposition of (or the obligation to
create or impose) any Lien upon any of the property or assets of such
Guarantor or any of its Subsidiaries pursuant to the terms of any
indenture, mortgage, deed of trust, loan agreement, credit agreement or
other material agreement or other instrument to which such Guarantor or any
of its Subsidiaries is a party or by which it or any of its property or
assets is bound or to which it may be subject or (iii) will violate any
provision of the certificate of incorporation or by-laws of such Guarantor
or any of its Subsidiaries.
(d) No order, consent, approval, license, authorization or
validation of, or filing, recording or registration with, or exemption by,
any governmental or public body or authority, or any subdivision thereof,
is required to authorize, or is required in connection with, (i) the
execution, delivery and performance of this Guaranty or any other Credit
Document to which such Guarantor is a party, or (ii) the legality,
validity, binding effect or enforceability of this Guaranty or any other
Credit Document to which such Guarantor is a party.
(e) There are no actions, suits or proceedings pending or to the
best knowledge of such Guarantor, threatened (i) with respect to such
Guarantor that could reasonably be expected to have a Material Adverse
Effect or (ii) that could reasonably be expected to have a material adverse
effect on the rights or remedies of the Creditors or on the ability of such
Guarantor to perform its respective obligations to the Creditors hereunder
and under the other Credit Documents to which it is a party.
13. Each Guarantor covenants and agrees that on and after the date
hereof and until the termination of the Total Commitment and all Interest Rate
Protection Agreements or Other Hedging Agreements and when no Note or Letter of
Credit remains outstanding (other than Letters of Credit, together with all Fees
that have accrued and will accrue thereon through the stated termination date of
such Letters of Credit, which have been supported in a manner satisfactory to
the Letter of Credit Issuer in its sole and absolute discretion) and all
Guaranteed Obligations have been paid in full (other than indemnities described
in Section 12.13 of the Credit Agreement and analogous provisions in the
Security Documents which are not then due and payable), such Guarantor shall
take, or will refrain from taking, as the case may be, all actions that are
necessary to be taken or not taken so that no violation of any provision,
covenant or agreement contained in Section 7 or 8 of the Credit Agreement, and
so that no Default or Event of Default, is caused by the actions of such
Guarantor or any of its Subsidiaries.
14. The Guarantors hereby jointly and severally agree to pay all
reasonable out-of-pocket costs and expenses of each Creditor in connection with
the enforcement of this Guaranty and any amendment, waiver or consent relating
hereto (including, without limitation, the
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reasonable fees and disbursements of counsel (including in-house counsel)
employed by any of the Creditors).
15. This Guaranty shall be binding upon each Guarantor and its
successors and assigns and shall inure to the benefit of the Creditors and their
successors and assigns.
16. Neither this Guaranty nor any provision hereof may be changed,
waived, discharged or terminated except with the written consent of each
Guarantor directly affected thereby and either (x) the Required Banks (or to the
extent required by Section 12.12 of the Credit Agreement, with the written
consent of each Bank) at all times prior to the time on which all Credit
Document Obligations have been paid in full or (y) the holders of at least a
majority of the outstanding Other Obligations at all times after the time on
which all Credit Document Obligations have been paid in full; provided, that any
--------
change, waiver, modification or variance affecting the rights and benefits of a
single Class (as defined below) of Creditors (and not all Creditors in a like or
similar manner) shall require the written consent of the Requisite Creditors (as
defined below) of such Class of Creditors (it being understood that the addition
or release of any Guarantor hereunder shall not constitute a change, waiver,
discharge or termination affecting any Guarantor other than the Guarantor so
added or released). For the purpose of this Guaranty the term "Class" shall
mean each class of Creditors, i.e., whether (x) the Bank Creditors as holders of
----
the Credit Document Obligations or (y) the Other Creditors as the holders of the
Other Obligations. For the purpose of this Guaranty, the term "Requisite
Creditors" of any Class shall mean each of (x) with respect to the Credit
Document Obligations, the Required Banks and (y) with respect to the Other
Obligations, the holders of at least a majority of all obligations outstanding
from time to time under the Interest Rate Protection Agreements or Other Hedging
Agreements.
17. Each Guarantor acknowledges that an executed (or conformed) copy of
each of the Credit Documents and Interest Rate Protection Agreements or Other
Hedging Agreements has been made available to its principal executive officers
and such officers are familiar with the contents thereof.
18. In addition to any rights now or hereafter granted under applicable
law (including, without limitation, Section 151 of the New York Debtor and
Creditor Law) and not by way of limitation of any such rights, upon the
occurrence and during the continuance of an Event of Default (such term to mean
and include any "Event of Default" as defined in the Credit Agreement or any
payment default under any Interest Rate Protection Agreement or Other Hedging
Agreement continuing after any applicable grace period), each Creditor is hereby
authorized at any time or from time to time, without notice to any Guarantor or
to any other Person, any such notice being expressly waived, to set off and to
appropriate and apply any and all deposits (general or special) and any other
indebtedness at any time held or owing by such Creditor to or for the credit or
the account of such Guarantor, against and on account of the obligations and
liabilities of such Guarantor to such Creditor under this Guaranty,
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irrespective of whether or not such Creditor shall have made any demand
hereunder and although said obligations, liabilities, deposits or claims, or any
of them, shall be contingent or unmatured. Notwithstanding anything to the
contrary contained in this Section 18, no Creditor shall exercise any such right
of set-off without the prior consent of the Agent or the Required Banks so long
as the Guaranteed Obligations shall be secured by any Real Property located in
the State of California, it being understood and agreed, however, that this
sentence is for the sole benefit of the Creditors and may be amended, modified
or waived in any respect by the Required Banks without the requirement of prior
notice to or consent by any Credit Party and does not constitute a waiver of any
rights against any Credit Party or against any Collateral.
19. All notices, requests, demands or other communications pursuant
hereto shall be deemed to have been duly given or made when delivered to the
Person to which such notice, request, demand or other communication is required
or permitted to be given or made under this Guaranty, addressed to such party at
(i) in the case of any Bank Creditor, as provided in the Credit Agreement, (ii)
in the case of any Guarantor, at its address set forth opposite its signature
below and (iii) in the case of any Other Creditor, at such address as such Other
Creditor shall have specified in writing to the Guarantor; or in any case at
such other address as any of the Persons listed above may hereafter notify the
others in writing.
20. If claim is ever made upon any Creditor for repayment or recovery of
any amount or amounts received in payment or on account of any of the Guaranteed
Obligations and any of the aforesaid payees repays all or part of said amount by
reason of (i) any judgment, decree or order of any court or administrative body
having jurisdiction over such payee or any of its property or (ii) any
settlement or compromise of any such claim effected by such payee with any such
claimant (including the Borrower), then and in such event each Guarantor agrees
that any such judgment, decree, order, settlement or compromise shall be binding
upon such Guarantor, notwithstanding any revocation hereof or other instrument
evidencing any liability of the Borrower, and such Guarantor shall be and remain
liable to the aforesaid payees hereunder for the amount so repaid or recovered
to the same extent as if such amount had never originally been received by any
such payee.
21. (a) THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE CREDITORS
AND OF THE UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. Any legal action or
proceeding with respect to this Guaranty or any other Credit Document to which
such Guarantor is a party may be brought in the courts of the State of New York
or of the United States of America for the Southern District of New York, and,
by execution and delivery of this Guaranty, each Guarantor hereby irrevocably
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Each Guarantor
hereby further irrevocably waives any claim that any such courts lack
jurisdiction over such Guarantor, and agrees not to plead or claim, in any legal
action or proceeding with respect to this Guaranty or any other Credit Document
to which such
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Guarantor is a party brought in any of the aforesaid courts, that any such court
lacks jurisdiction over such Guarantor. Each Guarantor further irrevocably
consents to the service of process out of any of the aforementioned courts in
any such action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to each Guarantor at its address set forth
opposite its signature below, such service to become effective 30 days after
such mailing. Each Guarantor hereby irrevocably waives any objection to such
service of process and further irrevocably waives and agrees not to plead or
claim in any action or proceeding commenced hereunder or under any other Credit
Document to which such Guarantor is a party that service of process was in any
way invalid or ineffective. Nothing herein shall affect the right of any of the
Creditors to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against each Guarantor in any other
jurisdiction.
(b) Each Guarantor hereby irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any of the aforesaid actions
or proceedings arising out of or in connection with this Guaranty or any other
credit document brought in the courts referred to in clause (a) above and hereby
further irrevocably waives and agrees not to plead or claim in any such court
that such action or proceeding brought in any such court has been brought in an
inconvenient forum.
22. In the event that all of the capital stock of one or more Guarantors
is sold or otherwise disposed of or liquidated in compliance with the
requirements of Section 8.02 of the Credit Agreement (or such sale or other
disposition or liquidation has been approved in writing by the Required Banks
(or all Banks if required by Section 12.12 of the Credit Agreement)) and the
proceeds of such sale, disposition or liquidation are applied in accordance with
the provisions of the Credit Agreement, to the extent applicable, such Guarantor
shall be released from this Guaranty and this Guaranty shall, as to each such
Guarantor or Guarantors, terminate, and have no further force or effect (it
being understood and agreed that the sale of one or more Persons that own,
directly or indirectly, all of the capital stock or partnership interests of any
Guarantor shall be deemed to be a sale of such Guarantor for the purposes of
this Section 22).
23. This Guaranty may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument. A set of counterparts executed by all
the parties hereto shall be lodged with the Borrower and the Agent.
24. EACH GUARANTOR AND EACH OF THE CREDITORS HEREBY IRREVOCABLY WAIVES
ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
OUT OF OR RELATING TO THIS
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GUARANTY, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY.
25. All payments made by any Guarantor hereunder will be made without
setoff, counterclaim or other defense.
26. It is understood and agreed that any Subsidiary of Holdings that is
required to execute a counterpart of this Guaranty after the date hereof
pursuant to Sections 7.16 and/or 8.16 of the Credit Agreement shall
automatically become a Guarantor hereunder by executing a counterpart hereof and
delivering the same to the Agent.
* * *
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IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be
executed and delivered as of the date first above written.
Address: PILKINGTON BARNES HIND, INC.
333 East Howard Avenue (named to be changed to PBH, Inc.),
Des Plaines, Illinois 60018 as a Guarantor
Attention: Edward Kelley
By /s/ Gerold B. Sweeney
----------------------------------
Title: Assistant Secretary
Address: PILKINGTON BARNES HIND
333 East Howard Avenue INTERNATIONAL, INC. (named to be
Des Plaines, Illinois 60018 changed to PBH International, Inc.),
Attention: Edward Kelley as a Guarantor
By /s/ Gerold B. Sweeney
----------------------------------
Title: Assistant Secretary
Address: BARNES-HIND INTERNATIONAL
333 East Howard Avenue INC.,
Des Plaines, Illinois 60018 as a Guarantor
Attention: Edward Kelley
By /s/ Gerold B. Sweeney
----------------------------------
Title: Assistant Secretary
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Address: WESLEY-JESSEN (PUERTO RICO),
333 East Howard Avenue INC.,
Des Plaines, Illinois 60018 as a Guarantor
Attention: Edward Kelley
By Gerald B. Sweeney
-----------------------------------
Title: Assistant Secretary
BANKERS TRUST COMPANY,
as Agent for the Banks
By Mary Kay Coyle
--------------------------------
Title: Managing Director
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EXHIBIT 4.8
THE PAYMENT OF PRINCIPAL AND INTEREST ON THIS NOTE
IS SUBJECT TO CERTAIN SUBORDINATION PROVISIONS SET
FORTH IN SECTION 3 HEREOF. THIS NOTE IS SUBJECT TO
CERTAIN TRANSFER RESTRICTIONS SET FORTH IN SECTION
7 HEREOF. THIS NOTE WAS ORIGINALLY ISSUED ON
OCTOBER 2, 1996, AND HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED OR ANY
COMPARABLE STATE SECURITIES LAW.
SUBORDINATED
PROMISSORY NOTE
October 2, 1996 $5,000,000
Wesley-Jessen Holding, Inc., a Delaware corporation (the "Corporation"),
-----------
hereby promises to pay to the order of Pilkington Holdings, Inc., a Delaware
corporation, or its permitted assigns (the "Holder"), the principal amount of
------
$5,000,000, together with interest thereon calculated from the date hereof in
accordance with the provisions of this subordinated promissory note (this
"Note"). The meanings of certain defined terms used herein are set forth in
----
Section 5 hereof. To the extent this Note is hereafter divided into two or more
notes, this Note and all other such notes are collectively referred to as the
"Notes."
1. Payment of Interest. Interest will accrue on a daily basis at the
-------------------
rate of 8.0% per annum (or, if less, at the highest rate then permitted under
applicable law) on the unpaid principal amount of this Note (plus all accrued
and unpaid interest as of the most recent Interest Reference Date (as defined
below)) outstanding from time to time, commencing on the date hereof; provided
that upon the occurrence of any Event of Default (as hereafter defined),
interest will accrue on a daily basis at the rate of 10% per annum (or, if less,
at the highest rate than permitted under applicable law) on the unpaid principal
amount of this Note (plus all accrued interest) outstanding from time to time,
with retroactive effect to the date hereof. For purposes hereof, "Interest
--------
Reference Date" means each anniversary of the date of this Note. Any accrued
- --------------
interest that has not previously been paid will be paid in full when all
remaining principal on this Note is paid.
2. Payment of Principal on Notes.
-----------------------------
(a) Scheduled Payment. Subject to the provisions of Section 3
-----------------
hereof, the Corporation will pay the entire unpaid principal amount of this Note
and any accrued and unpaid interest thereon on February 1, 2005 (the "Maturity
--------
Date").
- ----
(b) Optional Prepayments. Subject to the provisions of Section 3
--------------------
hereof, the Corporation may, at any time and from time to time, without premium
or penalty, prepay all
<PAGE>
or a portion of the outstanding principal amount of this Note; but any
prepayment will first be applied to any accrued but unpaid interest.
(c) Mandatory Prepayment. Subject to the provisions of Section 3
--------------------
hereof, upon the occurrence of a Liquidity Event, the Corporation will pay the
entire unpaid principal amount of this Note and any accrued and unpaid interest
thereon.
(d) Time of Payment. If any payment of principal or interest on
---------------
this Note becomes due on a Saturday, Sunday, or legal holiday under the laws of
the State of New York or Illinois, then such payment will be made on the next
business day and that extension of time will be included in computing interest
in connection with that payment.
3. Subordination: Restrictions on Payment.
--------------------------------------
(a) Notwithstanding anything in this Note to the contrary (other
than as provided in Section 13 hereof), the obligations of the Corporation in
respect of this Note will be subordinate and junior in right of payment, to the
extent and in the manner hereinafter set forth, to all Superior Debt.
(b) If (1) the Corporation makes a general assignment for the
benefit of creditors; (2) an order, judgment, or decree is entered adjudicating
the Corporation bankrupt or insolvent; (3) any order for relief with respect to
the Corporation is entered under the Federal Bankruptcy Code; (4) the
Corporation petitions or applies to any tribunal for the appointment of a
custodian, trustee, receiver, or liquidator of the Corporation or of any
substantial part of the assets of the Corporation, or commences any proceeding
relating to the Corporation under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution, or liquidation law of any
jurisdiction; or (5) any such petition or application is filed, or any such
proceeding is commenced, against the Corporation and either (x) the Corporation
by any act indicates its approval thereof, consent thereto, or acquiescence
therein or (y) such petition, application, or proceeding is not dismissed within
90 days ((1) through (5) collectively referred to as an "Insolvency Event");
----------------
then:
(i) the holders of Superior Debt will be entitled to receive
payment in full in cash of all principal, premium, interest, fees, and
charges then due on all Superior Debt (including interest, fees, and
charges accruing thereon after the commencement of any such proceedings)
before the Holder will be entitled to receive any payment on account of
principal, interest, or other amounts due (or past due) upon this Note, and
the holders of Superior Debt will be entitled to receive for application in
payment thereof any payment or distribution of any kind or character,
whether in cash, property, or securities or by setoff or otherwise, that
may be payable or deliverable in any proceedings in respect of this Note;
and
(ii) any payment or distribution of any assets of the
Corporation, of any kind or character, to which any Holder would be
entitled except for the provisions of this Section 3(b) will be paid or
delivered by the Corporation directly to the
-2-
<PAGE>
holders of all Superior Debt in the manner provided in Section 3(f) below,
for application in payment thereof until all Superior Debt (including
interest, fees, and charges accrued thereon after the date of commencement
of such proceedings) has been paid in full in cash.
(c) Unless and to the extent permitted under the terms of any agreement
relating to, or instrument evidencing, any Superior Debt, and until all Superior
Debt has been paid in full in cash, the Corporation will not, directly or
indirectly, make any payment with respect to the Notes; but even if so
permitted, no payment or distribution of any kind with respect to the Notes will
be made if (i) any default or event of default under any of the terms of any
agreement relating to, or instrument evidencing, any Superior Debt has occurred
and is continuing or would exist as a result of such payment or distribution
that (whether with or without notice, lapse of time, or both) would permit the
holder of such Superior Debt to accelerate all or any portion of such Superior
Debt or (ii) any Subsidiary of the Corporation is prohibited under any of the
terms of any agreement relating to, or instrument evidencing, any Superior Debt
from paying cash dividends to the Corporation for the purpose of making such
payment of principal or interest or such distribution that, if violated (whether
with or without notice, lapse of time, or both), would permit the holder of such
Superior Debt to accelerate all or any portion of such Superior Debt
(collectively, the "Blockage Events"). The Corporation will notify the Holder(s)
---------------
in writing of the occurrence of a Blockage Event; but, notwithstanding anything
to the contrary in this Note, the failure of the Corporation to so notify the
Holder(s) of the occurrence of a Blockage Event will have no effect on the
obligations of the Corporation or the Holder(s) during the continuance of such
Blockage Event as set forth herein. Upon termination of a Blockage Event (so
long as no other Blockage Event has occurred and is continuing), the Corporation
will resume making payments of principal when due and payments of accrued but
unpaid interest pursuant to the terms and conditions of this Note.
(d) No amendment or modification of the terms of Section 3 of this Note
will be effective against any Person who was a holder of Superior Debt before or
at the time of such amendment or modification unless such holder(s) of Superior
Debt so consents, in accordance with the terms of the instruments (if any)
evidencing such Superior Debt.
(e) The holders of Superior Debt may, at any time, in their discretion,
renew, amend, extend or otherwise modify the terms and provisions of Superior
Debt so held or exercise any of their rights under the Superior Debt including,
without limitation, the waiver of defaults thereunder and the amendment of any
of the terms or provisions thereof (or any instrument evidencing or creating the
same), all without notice to or assent from any Holder. No compromise,
alteration, amendment, renewal, or other change of, or waiver, consent, or other
action in respect of any liability or obligation under or in respect of, any
terms, covenants, or conditions of the Superior Debt (or any instrument
evidencing or creating the same), whether or not such release is in accordance
with the provisions of the Superior Debt (or any instrument evidencing or
creating the same), will in any way alter or affect any of the subordination
provisions of this Note.
-3-
<PAGE>
(f) If, notwithstanding the provisions of Section 3 of this Note, any
Holder receives any payment or distribution of any character or any security in
contravention of this Section 3 and before all the Superior Debt has been paid
in full in cash, such Holder will hold such payment, distribution, or security
in trust for the benefit of, and will immediately pay over or deliver or
transfer to, the holders of Superior Debt or their duly appointed agents for
application of payment according to the priorities of such Superior Debt and
ratably among the holders of any class of Superior Debt. No such payment
received by any Holder and delivered to the holders of the Superior Debt will be
deemed to be a payment on this Note for any reason whatsoever and the
indebtedness under this Note will remain as if such erroneous payment had never
been paid by the Corporation or received by such Holder. If any Holder fails to
endorse or assign any such payment, distribution or security, each holder of any
Superior Debt is hereby irrevocably authorized to endorse or assign such
payment, distribution or security.
(g) No act or failure to act on the part of the Corporation will
prejudice any present or future holder of Superior Debt in its right to enforce
the provisions of Section 3 of this Note.
(h) If there exists prior to the earlier of the Maturity Date or the
occurrence of a Liquidity Event (i) any Blockage Event or (ii) any Event of
Default under Section 4 below, no Holder may take or continue any action, or
exercise or continue to exercise any rights, remedies or powers under the terms
of this Note, or exercise or continue to exercise any other right or remedy at
law or equity that such Holder might otherwise possess, to collect any amount
due and payable in respect of this Note, including, without limitation,
accelerating this Note (and if this Note has already been accelerated), the
Holder(s) will, immediately upon becoming aware of the occurrence of such
Blockage Event or Event of Default, reverse such acceleration), commencing any
foreclosure on any lien or security interest, filing any petition in bankruptcy
or taking advantage of any other insolvency law of any jurisdiction, unless and
until the Superior Debt has been fully and finally paid (whether in cash or such
other form of consideration acceptable to the holders of Superior Debt in their
sole discretion) and satisfied, unless:
(i) one or more of the holders of the Superior Debt has accelerated
the maturity of Superior Debt in an amount in excess of $2,500,000, in
which case the Holder(s) may accelerate the maturity hereof but may not
take any other action described above unless otherwise permitted to do so
by Section 3(h)(ii) below; but the acceleration of the Notes will
immediately be reversed if and when (A) one or more holders of Superior
Debt take similar action that results in the aggregate amount of Superior
Debt to be accelerated to be less than $2,500,000 or (B) such Superior Debt
is fully and finally paid (whether in cash or such other form of
consideration acceptable to the holders of Superior Debt in their sole
discretion); or
(ii) one or more of the holders of the Superior Debt has commenced
any action or taken any judicial action to enforce their rights as provided
in their respective agreements relating to, or instruments evidencing,
their Superior Debt in
-4-
<PAGE>
connection with an Insolvency Event (other than an action to dismiss a
proceeding commenced against the Corporation).
Notwithstanding the foregoing or any permissible action taken by any Holder, no
Holder will be entitled to receive any payment in contravention of the other
provisions of this Section 3. Notwithstanding anything to the contrary in this
Section 3(h), any Holder may take such steps as are necessary to avoid a loss of
its rights through the running of any applicable statute of limitations, or as a
result of any other statute or rule which the time for filing claims, or making
proofs of claims, or would otherwise cause a claim to be time-barred.
(i) If any payment or distribution to which any Holder would otherwise be
entitled but for the provisions of this Section 3 has been applied, pursuant to
the provisions of this Section 3, to the payment of Superior Debt, then in such
case and to such extent, such Holder (i) will be entitled to receive from the
holders of such Superior Debt at the time outstanding any payments or
distributions received by such holders of Superior Debt in excess of the amount
sufficient to pay all Superior Debt in full (whether or not then due and whether
such payment was in cash or such other form of consideration acceptable to the
holders of Superior Debt in their sole discretion), (ii) following payment in
full of the Superior Debt (whether in cash or such other form of consideration
acceptable to the holders of Superior Debt in their sole discretion), will be
entitled to receive all further payments or distributions applicable to Superior
Debt, and (iii) following payment in full of the Superior Debt (whether in cash
or such other form of consideration acceptable to the holders of Superior Debt
in their sole discretion), will be subrogated to the rights of the holders of
the Superior Debt to receive distributions applicable to the Superior Debt, in
each case until this Note has been paid in full in cash or such other
consideration acceptable to each Holder in its sole discretion. If any Holder
has been subrogated to the rights of the holders of Superior Debt due to the
operation of this Section 3(i), the Corporation agrees to take all such
reasonable actions requested by such Holder in order to cause such Holder to be
able to obtain payments from the Corporation with respect to such subrogation
rights as soon as possible.
(j) The provisions of this Section 3 are solely for the purpose of
defining the relative rights of the holders of Superior Debt on the one hand,
and the Holder(s) on the other hand, against the Corporation and its assets, and
nothing herein is intended to or will impair, as between the Corporation and the
Holder(s), the obligations of the Corporation which are absolute and
unconditional, to pay to the Holder(s) the principal and interest on this Note
as and when they become due and payable in accordance with their terms, or is
intended to or will affect the relative rights of the Holder(s) and creditors of
the Corporation other than the holders of the Superior Debt, nor, except as
provided in this Section 3, will anything herein or therein prevent any Holder
from exercising all remedies otherwise permitted by applicable law upon default
under this Note, subject to the rights, if any, under this Section 3 of the
holders of Superior Debt in respect of cash, property or securities of the
Corporation received upon the exercise of any such remedy and subject to this
Section 3.
-5-
<PAGE>
4. Events of Default.
-----------------
(a) Definition. For purposes of this Note, an Event of Default
----------
will be deemed to have occurred if:
(i) the Corporation defaults in the payment of principal or
interest of this Note on the date when due, whether at maturity or
otherwise; or
(ii) the Corporation makes a general assignment for the
benefit of creditors; an order, judgment or decree is entered
adjudicating the Corporation bankrupt or insolvent; any order for
relief with respect to the Corporation is entered under the Federal
Bankruptcy Code; the Corporation petitions or applies to any tribunal
for the appointment of a custodian, trustee, receiver or liquidator
of the Corporation or of any substantial part of the assets of the
Corporation, or commences any proceeding relating to the Corporation
under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any
jurisdiction; or any such petition or application is filed, or any
such proceeding is commenced, against the Corporation and either (A)
the Corporation by any act indicates its approval thereof, consent
thereto or acquiescence therein or (B) such petition, application or
proceeding is not dismissed within 90 days.
(b) Consequences of the Occurrence of an Event of Default.
-----------------------------------------------------
(i) If an Event of Default occurs and is continuing, after 5
days prior written notice to the Corporation, the Holder(s)
representing a majority of the aggregate principal amount of the
Notes then outstanding may declare all or any portion of the
outstanding principal amount of the Notes due and payable and demand
immediate payment of all or any portion of the outstanding principal
amount of the Notes. If the Holder(s) of Notes representing a
majority of the aggregate principal amount of the Notes then
outstanding demand immediate payment of all or any portion of the
Notes, the Corporation will immediately pay to such Holder(s) the
principal amount of the Notes requested to be paid plus accrued and
unpaid interest thereon.
(ii) After 5 days prior written notice to the Corporation,
each Holder will be entitled to exercise any other rights which such
Holder may have been afforded under any contract or agreement at any
time and any other rights which such Holder may have pursuant to
applicable law.
5. Definitions.
-----------
"Debt" means (a) indebtedness for borrowed money, including, without
----
limitation, principal, interest accruing before and after any Insolvency Event,
premiums, penalties, fees, or expenses, and regardless of whether direct or
indirect, now existing or hereafter arising, absolute or contingent, secured or
unsecured, or long-term or short-term, (b) reimbursement obligations under
letters of
-6-
<PAGE>
credit, bankers acceptances, and similar obligations, (c) obligations arising
under guarantees executed by the Corporation or any of its Subsidiaries of items
described in (a) and/or (b) above, and (d) renewals, extensions, refundings,
deferrals, restructurings, amendments, and modifications of the items described
in (a), (b) and/or (c) above.
"Liquidity Event" means any date on which (i) Bain Capital, Inc. and its
---------------
affiliates cease to beneficially own in the aggregate at least 25% of the issued
and outstanding shares of the Corporation's voting common stock or (ii) Bain
Capital, Inc. and its affiliates receive at least $1 of proceeds from a Public
Offering.
"Person" means an individual, a partnership, a corporation, an association,
------
a limited liability company, a joint stock corporation, a trust, a joint
venture, an unincorporated organization, and a governmental entity or any
department, agency, or political subdivision thereof.
"Public Offering" means any offering by the Corporation or any of its
---------------
Subsidiaries of its equity securities (including, without limitation, any
secondary offering of the equity securities of the Corporation or any of its
Subsidiaries) to the public pursuant to an effective registration statement
under the Securities Act of 1933, as then in effect (including pursuant to Rule
144, but excluding Rule 144A or Rule 144(k)), but a Public Offering does not
include an offering made in connection with an employee benefit plan.
"Subsidiary" means any corporation of which the shares of outstanding
----------
capital stock possessing the voting power (under ordinary circumstances) to
elect a majority of the board of directors are, at the time as of which any
determination is being made, owned by the Corporation either directly or
indirectly through subsidiaries.
"Superior Debt" means all Debt of the Corporation and/or any of its
-------------
Subsidiaries (other than the Debt evidenced by any of the Notes).
6. Amendment and Waiver. Except as otherwise expressly provided herein,
--------------------
the provisions of this Note may be amended and the Corporation may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Corporation has obtained the written consent of the
Holder(s) of Notes representing a majority of the aggregate principal amount of
Notes then outstanding; provided that any amendment to the provisions of this
Note which authorize or permit the extension of time for, or any reduction of
the amount of, any payment of the principal of, or interest on, the Notes shall
require the written consent of all Holder(s) of all Notes then outstanding.
7. Transfer. The Holder shall not sell, transfer, assign, pledge or
--------
otherwise dispose of (each of the foregoing, a "Transfer") this Note; provided
that (i) the Holder may Transfer all (but not less than all) of this Note to any
affiliate of Holder, and (ii) the Holder may sell all (but not less than all) of
this Note to any Person who is not a competitor of Wesley-Jessen Corporation or
its affiliates, subject (in the case of clause (ii) above) to the right of first
refusal described in this paragraph 7; provided that the restrictions contained
in this paragraph 7 will continue to be applicable to this Note after any
Transfer. At least 30 days prior to making any Transfer of this Note, the
Holder shall
-7-
<PAGE>
deliver a written notice (the "Transfer Notice") to the Corporation and Bain
Capital, Inc. ("Bain"). The Transfer Notice shall disclose in reasonable detail
the identity of the proposed transferee and the proposed terms and conditions of
the Transfer. First, the Corporation or its Subsidiaries may elect to purchase
all (but not less than all) of this Note at the price and on the terms specified
in the Transfer Notice by delivering written notice of such election to the
Holder and Bain as soon as practical but in any event within ten days after the
delivery of the Transfer Notice. If the Corporation or its Subsidiaries have not
elected to purchase this Note within such ten-day period, Bain (or its designee)
may elect to purchase all (but not less than all) of this Note at the price and
on the terms specified in the Transfer Notice by delivering written notice of
such election to the Holder as soon as practical but in any event within 20 days
after delivery of the Transfer Notice. If the Corporation, any Subsidiary of the
Corporation or Bain (or its designee) has elected to purchase this Note, the
Transfer of this Note shall be consummated as soon as practical after the
delivery of the election notice(s). In the event that neither the Corporation,
nor any Subsidiary of the Corporation nor Bain (or its designee) has elected to
purchase this Note, the Holder may, after the expiration of each of the
foregoing election periods, Transfer this Note to the party identified in the
Transfer Notice at a price no less than the price specified in the Transfer
Notice and on other terms no more favorable to the transferee than offered to
the Corporation and Bain in the Transfer Notice. The purchase price specified in
any Transfer Notice shall be payable solely in cash at the closing of the
transaction. The Notes will bear a legend evidencing the transfer restrictions
described in this paragraph 7.
8. Withholding of Taxes. The Corporation shall be entitled to withhold
--------------------
the amount of any withholding or other payment required of the Corporation under
the tax withholding provisions of the Internal Revenue Code of 1986, as amended
and the regulations promulgated thereunder, any state's income tax act or any
other applicable law with respect to any payment due under this Note.
9. Cancellation. After all principal and accrued interest at any time
------------
owed on this Note has been paid in full, this Note will be surrendered to the
Corporation for cancellation and will not be reissued.
10. Place of Payment; Notices. Payments of principal and interest and any
-------------------------
notice hereunder are to be made by wire transfer of immediately available funds
and are to be delivered to the following address:
Pilkington plc
Prescot Road
St. Helens, Merseyside
England, WA10 3TT
Attention: Secretary
Facsimile: 011 44 1744 730577
or to such other address as specified by prior written notice to the
Corporation. Notices sent by the Corporation will be deemed received when
delivered personally or sent by facsimile or two days after being sent by
Federal Express or other overnight carrier or two days after being sent by
certified or registered mail.
-8-
<PAGE>
11. Governing Law. All issues and questions concerning the construction,
-------------
validity, enforcement and interpretation of this Note shall be governed by, and
construed in accordance with, the laws of the State of California, without
giving effect to any choice of law or conflict of law rules or provisions
(whether of the State of California or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
California.
12. Waiver of Presentment, Demand and Dishonor. The Corporation hereby
------------------------------------------
waives presentment for payment, protest, demand, notice of protest, notice of
nonpayment and diligence with respect to this Note, and waives and renounces all
rights to the benefits of any statute of limitations or any moratorium,
appraisement, exemption, or homestead now provided or that hereafter may be
provided by any federal or applicable state statute, including but not limited
to exemptions provided by or allowed under the Federal Bankruptcy Code, both as
to itself and as to all of its property, whether real or personal, against the
enforcement and collection of the obligations evidenced by the Notes and any and
all extensions, renewals, and modifications hereof.
13. Covenants.
---------
(a) If permitted by the terms and conditions and any restrictions
set forth in the loan agreements or indentures for Superior Debt to which the
Corporation or any of its Subsidiaries is a party, the Corporation shall apply
the net cash proceeds received by the Corporation (after deduction of all
discounts, underwriters' commission and other expenses of such Public Offering)
from any Public Offering to repay any accrued and unpaid interest on and
principal of this Note. In the event the repayment described in the preceding
sentence would not otherwise be permitted due to the terms and conditions of, or
any restrictions contained in, the loan agreements or indentures for Superior
Debt, the Corporation covenants and agrees that it shall use reasonable best
efforts to obtain any necessary waiver or amendment to such loan agreements or
indentures to permit the repayment described in the preceding sentence. In case
less than the total accrued and unpaid interest on and principal of this Note is
repaid pursuant to this paragraph 13, such payment will be applied first to all
accrued and unpaid interest on this Note, and then to the unpaid principal
thereof.
(b) If, after the consummation of an initial Public Offering, the
Corporation consummates a secondary Public Offering in which Bain Capital, Inc.
or its affiliates receive at least $1 of proceeds, the Corporation shall repay
all accrued and unpaid interest on and the entire principal amount of this Note.
14. Restriction on Dividends. During the period that this Note shall
------------------------
remain outstanding and unpaid, the Corporation agrees that it shall not pay
dividends or make any distributions on its capital stock, other than repurchases
of capital stock or options to purchase capital stock held by employees or
former employees of the Corporation or its Subsidiaries.
* * * * * *
-9-
<PAGE>
IN WITNESS WHEREOF, the Corporation has executed and delivered this
Note on the date first above written.
WESLEY-JESSEN HOLDING, INC.
By /s/ Adam Kirsch
-----------------------------
Its Director & Executive V.P.
----------------------------
-10-
<PAGE>
EXHIBIT 10.3
EXECUTION COPY
--------------
AMENDED AND RESTATED ADVISORY AGREEMENT
---------------------------------------
This Amended and Restated Advisory Agreement (this "Agreement") is
---------
made and entered into as of October 2, 1996, by and between Wesley-Jessen
Corporation, a Delaware corporation (the "Company"), and Bain Capital, Inc., a
-------
Delaware corporation ("Bain"). This Agreement amends, restates and replaces
----
that certain Advisory Agreement dated as of June 28, 1995, by and between the
Company and Bain.
WHEREAS, the Company desires to retain Bain and Bain desires to
perform for the Company and its subsidiaries and parent certain services;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties agree as follows:
1. Term. This Agreement shall be in effect for an initial term
----
commencing on the date hereof and ending on January 31, 2004 (the "Term"), and
----
shall be automatically extended thereafter on a year to year basis unless the
Company or Bain provides written notice of its desire to terminate this
Agreement to the other party 90 days prior to the expiration of the Term or any
extension thereof.
2. Services. Bain shall perform or cause to be performed such
--------
services for the Company and its subsidiaries and parent as directed by the
Company's board of directors, which may include, without limitation, the
following:
(a) general executive and management services;
(b) identification, support, negotiation and analysis of acquisitions
and dispositions by the Company or its subsidiaries or parent;
(c) support, negotiation and analysis of financing alternatives,
including, without limitation, in connection with acquisitions, capital
expenditures and refinancing of existing indebtedness;
(d) finance functions, including assistance in the preparation of
financial projections, and monitoring of compliance with financing agreements;
(e) marketing functions, including monitoring of marketing plans and
strategies;
(f) human resource functions, including searching and hiring of
executives; and
(g) other services for the Company and its subsidiaries and parent
upon which the Company's board of directors and Bain agree.
<PAGE>
3. Advisory Fee. Payment for services rendered by Bain and/or its
------------
affiliates incurred in connection with the performance of services pursuant to
this Agreement shall not exceed $500,000 per fiscal quarter to Bain and/or its
affiliates plus reasonable out-of-pocket expenses of Bain and/or its affiliates,
payable by the Company to Bain or its designees on a quarterly basis in arrears
commencing as of the date hereof, so long as Bain and/or its affiliates (or
its/their permitted assignee) is providing services as requested by the
Company's board of directors and such payment is not prohibited by that certain
Credit Agreement dated as of the date hereof (the "Credit Agreement"), among the
----------------
Company, Wesley-Jessen Holding, Inc., Bankers Trust Company, as Agent, and the
other lenders party thereto.
4. Transaction Fees.
----------------
(a) The Company hereby agrees to pay to Bain or its designees on the
closing date of the Credit Agreement a fee for services rendered in
connection with the structuring of the Credit Agreement and certain other
management services. Such fees shall be payable by wire transfer in an
amount not to exceed $3,000,000 to Bain or its designees plus reasonable
out-of-pocket expenses.
(b) In addition, during the term of this Agreement, the Company shall
pay to Bain or its designees a transaction fee in connection with the
consummation of each acquisition, divestiture or financing by the Company
or its subsidiaries or parent in an amount equal to 1% of the aggregate
value of such transaction.
5. Personnel. Bain shall provide and devote to the performance of
---------
this Agreement such partners, employees and agents of Bain as Bain shall deem
appropriate to the furnishing of the services required.
6. Liability. Neither Bain nor any of its affiliates, partners,
---------
employees or agents shall be liable to the Company or its subsidiaries or
affiliates for any loss, liability, damage or expense arising out of or in
connection with the performance of services contemplated by this Agreement,
unless such loss, liability, damage or expense shall be proven to result
directly from gross negligence, willful misconduct or bad faith on the part of
Bain, its affiliates, partners, employees or agents acting within the scope of
their employment or authority.
7. Indemnity. The Company and its subsidiaries and parent shall
---------
defend, indemnify and hold harmless each of Bain, its affiliates, partners,
employees and agents from and against any and all loss, liability, damage or
expenses arising from any claim by any person with respect to, or in any way
related to, the performance of services contemplated by this Agreement
(including attorneys' fees) (collectively, "Claims") resulting from any act or
------
omission of Bain, its affiliates, partners, employees or agents, other than for
Claims which shall be proven to be the direct result of gross negligence, bad
faith or willful misconduct by Bain, its affiliates, partners, employees or
agents. The Company and its subsidiaries and parent shall defend at its own
cost and expense any and all suits or actions (just or unjust) which may be
brought against the Company, its subsidiaries and parent and Bain, its officers,
directors, affiliates, partners, employees or agents or in which Bain, its
affiliates, partners, employees or agents may be impleaded with others upon any
Claims, or upon
-2-
<PAGE>
any matter, directly or indirectly, related to or arising out of this Agreement
or the performance hereof by Bain, its affiliates, partners, employees or
agents, except that if such damage shall be proven to be the direct result of
gross negligence, bad faith or willful misconduct by Bain, its affiliates,
partners, employees or agents, then Bain shall reimburse the Company and its
subsidiaries and parent for the costs of defense and other costs incurred by the
Company and its subsidiaries and parent.
8. Notices. All notices hereunder shall be in writing and shall be
-------
delivered personally or mailed by United States mail, postage prepaid, addressed
to the parties as follows:
To the Company:
--------------
Wesley-Jessen Corporation
333 East Howard Avenue
Des Plaines, Illinois 60018
Attention: President
To Bain:
-------
Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Attention: Stephen Pagliuca
Adam Kirsch
9. Assignment. Neither party may assign any obligations hereunder
----------
to any other party without the prior written consent of the other party (which
consent shall not be unreasonably withheld); provided that Bain may, without
consent of the Company, assign its rights and obligations under this Agreement
to any of its affiliates (but only if such affiliate is a person or entity
(excluding any Bain portfolio companies) controlled by Bain, or in the case of
an affiliate which is a partnership, Bain is the ultimate general partner of
such partnership). The assignor shall remain liable for the performance of any
assignee.
10. Successors. This Agreement and all the obligations and benefits
----------
hereunder shall inure to the successors and assigns of the parties.
11. Counterparts. This Agreement may be executed and delivered by
------------
each party hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original and all of which taken together shall
constitute but one and the same agreement.
12. Entire Agreement; Modification; Governing Law. The terms and
---------------------------------------------
conditions hereof constitute the entire agreement between the parties hereto
with respect to the subject matter of this Agreement and supersede all previous
communications, either oral or written, representations or warranties of any
kind whatsoever, except as expressly set forth herein. No modifications of this
Agreement nor waiver of the terms or conditions thereof shall be binding upon
either party unless
-3-
<PAGE>
approved in writing by an authorized representative of such party. All issues
concerning this agreement shall be governed by and construed in accordance with
the laws of the State of Illinois, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of Illinois or any other
jurisdiction) that would cause the application of the law of any jurisdiction
other than the State of Illinois.
* * * * *
-4-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
WESLEY-JESSEN CORPORATION
By: Adam Kirsch
----------------------------------
Its: V.P.
----------------------------------
BAIN CAPITAL, INC.
By: Adam Kirsch
----------------------------------
Its: Managing Director
----------------------------------
<PAGE>
Exhibit 10.4
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT, dated as of June 28, 1995 (this
"Agreement"), is made by and among Wesley-Jessen Holding, Inc., a Delaware
---------
corporation (the "Company") and the Persons set forth on the "Schedule of
------- -----------
Purchasers" attached hereto (hereinafter referred to collectively as the
- ----------
"Purchasers" and individually as a "Purchaser"). The Purchasers will purchase,
- ----------- ---------
severally and not jointly, the number of shares of stock listed on the Schedule
of Purchasers attached hereto. Except as otherwise indicated, capitalized terms
used herein are defined in Section 6 hereof.
Pursuant to a Purchase and Sale Agreement, dated as of May 5, 1995
("Acquisition Agreement"), between WJ Acquisition Corp. ("Buyer") and Schering
- ----------------------- -----
Corporation, Buyer will purchase the Assets (as such term is defined in the
Acquisiton Agreement) (the "Acquisition").
-----------
The purchase and sale of stock contemplated by this Agreement will be
consummated contemporaneously with the consummation of the Acquisition pursuant
to the terms of the Acquisition Agreement.
The parties hereto agree as follows:
Section 1. Authorization of Issuance and Sale of Stock.
-------------------------------------------
1A. The Company will authorize the issuance and sale to the
Purchasers of an aggregate of:
(i) 415,000 shares of the Company's Class L Common Stock, par value
$.01 per share (the "Class L Common"), for a purchase price of $17.40723
--------------
per share; and
(ii) 3,735,000 shares of the Company's Common Stock, par value $.01
per share (the "Common"), for a purchase price of $0.08059 per share.
------
<PAGE>
The Class L Common and the Common are hereinafter sometimes referred to
collectively as the "Common Stock."
------------
Section 2. Purchase and Sale of Common Stock.
---------------------------------
2A. Purchase and Sale. The Company will sell to each Purchaser, and,
-----------------
subject to the terms and conditions set forth herein, each Purchaser will
purchase from the Company, the shares of Common Stock set forth beside such
Purchaser's name on the Schedule of Purchasers, at the purchase prices per share
set forth in Section 1 above. The sale to and purchase by each Purchaser of the
Common Stock to be purchased by such Purchaser hereunder will constitute a
separate sale and purchase.
2B. The Closing. The closing of the separate sales and purchases of the
-----------
Common Stock (the "Closing") will take place at a place mutually agreeable to
-------
the Purchasers and the Company. At the Closing the Company will deliver to each
Purchaser a certificate or certificates evidencing the number of shares of each
class of Common Stock to be purchased by such Purchaser, registered in such name
as such Purchaser shall designate, against payment of the purchase price
therefor by wire transfer of immediately available funds to a bank account
designated by the Company.
Section 3. Restrictions on Transfers.
-------------------------
3A. Restrictions. Restricted Securities are only transferable pursuant to
------------
(i) public offerings registered under the Securities Act, (ii) Rule 144 or Rule
144A of the Securities and Exchange Commission (or any similar rules then in
force) if such rules are available, and (iii) subject to the conditions
specified in Section 3B below, any other legally available means of transfer
pursuant to the Securities Act.
3B. Procedure for Transfer. In connection with the transfer of any
----------------------
Restricted Securities (other than a transfer referred to in clauses (i) or (ii)
of Section 3A above), the holder thereof will deliver written notice to the
Company describing in reasonable detail the transfer or proposed transfer,
together with an opinion of Kirkland & Ellis or other counsel which (to the
Company's reasonable satisfaction) is knowledgeable in securities law matters to
the effect that such transfer of Restricted Securi-ties may be effected without
registration of such Restricted Securities under the Securities Act. In
addition, if the holder of such Restricted Securities delivers to the Company an
opinion of
-2-
<PAGE>
such counsel that no subsequent transfer of such Restricted Securities will
require registration under the Securities Act, the Company will promptly upon
such contemplated transfer deliver new certificates for such Restricted
Securities which do not bear the Securities Act Legend set forth in Section 5A
below. If the Company is not required to deliver new certificates for such
Restricted Securities not bearing such legend, the holder thereof will not
transfer the same until the prospective transferee has confirmed to the Company
in writing its agreement to be bound by the conditions contained in this Section
and Section 5A.
3C. Transferees. Upon request of any Purchaser, the Company shall
-----------
promptly supply to such Purchaser or its prospective transferees all information
required to be delivered in connection with a transfer pursuant to Rule 144A of
the Securities and Exchange Commission.
Section 4. Representations and Warranties of the Company. The Company
---------------------------------------------
hereby represents and warrants to the Purchasers that as of the Closing:
4A. Organization, etc. The Company is a corporation duly organized,
-----------------
validly existing and in good standing under the laws of the State of Delaware.
The Company has corporate power and authority to carry on its business as now
conducted and presently proposed to be conducted and to carry out the
transactions contemplated by this Agreement.
4B. Capital Stock and Related Matters.
---------------------------------
(i) As of the Closing, (a) the authorized capital stock of the Company
will consist of 600,000 shares of Class L Common and 5,400,000 shares of Common
and (b) the Company will have issued, and there will be outstanding, 415,000
shares of Class L Common and 3,735,000 shares of Common.
(ii) As of the Closing, the Company will not have outstanding any stock or
securities convertible or exchangeable for any shares of its capital stock, nor
will it have outstanding any rights or options to subscribe for or to purchase
any capital stock or any stock or securities convertible into or exchangeable
for any capital stock, other than those options granted to management of the
Company or its subsidiaries to purchase not more than 700,000 shares of Common.
-3-
<PAGE>
(iii) As of the Closing, (A) the outstanding Common Stock of the
Company will be held exclusively by the Purchasers in the amounts set forth on
the Schedule of Purchasers and, (B) the only commitment of the Company to issue
shares of its capital stock, or any rights or options to subscribe for or
purchase any capital stock, will be for the issuance of stock and/or options for
up to 15,000 shares of Class L Common and 835,000 shares of Common to management
employees of the Company or its subsidiaries. As of the Closing, all of the
outstanding shares of the Company's capital stock will have been duly
authorized, and upon payment therefor will be validly issued, fully paid and
nonassessable.
(iv) The Company has delivered to the Purchasers true and complete
copies of its certificate of incorporation and bylaws as in effect on the date
hereof.
4C. Authorization; No Breach. The execution, delivery and
------------------------
performance of this Agreement and all other agreements and transactions
contemplated hereby and thereby have been duly authorized by the Company. This
Agreement constitutes a valid and binding obligation of the Company, enforceable
in accordance with its terms, subject to the availability of equitable remedies
and to the laws of bankruptcy and other similar laws affecting creditors' rights
generally. The execution and delivery by the Company of this Agreement and all
other agreements and instruments contemplated hereby to be executed by the
Company, the filing of the Company's amended certificate of incorporation with
the Secretary of State of Delaware, and the offering, sale and issuance of the
Common Stock hereunder, do not and will not (i) conflict with or result in a
breach of the terms, conditions or provisions of, (ii) constitute a default
under, (iii) result in the creation of any lien, security interest, charge or
encumbrance upon the Company's capital stock or assets pursuant to, (iv) give
any third party the right to accelerate any obligation under, (v) result in a
violation of, or (vi) require any authorization, consent, approval, exemption or
other action by or notice to any court or administrative or governmental body
(other than in connection with certain state and federal securities laws)
pursuant to, the amended certificate of incorporation or the bylaws, or any law,
statute, rule, regulation, instrument, order, judgment or decree to which the
Company is subject or any agreement or instrument to which the Company is a
party.
4D. Conduct of Business; Liabilities. The Company has not conducted
--------------------------------
any business, incurred any expenses, obligations or
-4-
<PAGE>
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise,
whether or not known to the Company and whether due or to become due), entered
into any contracts or agreements, except in connection with the consummation of
the transactions contemplated by this Agreement, the Acquisition Agreement and
the financing documents relating thereto, or violated any laws or governmental
rules or regulations.
4E. No Registration. Assuming the truth and accuracy of the
---------------
representations set forth in Section 5 hereof, the offers and sales of the
Common Stock pursuant to the terms hereof are not required to be registered
under the Securities Act or any state securities laws.
Section 5. Purchasers' Representations and Warranties.
-------------------------------------------
5A. Purchaser's Investment Representations. Each Purchaser hereby
--------------------------------------
represents that it is acquiring the Restricted Securities purchased hereunder or
acquired pursuant hereto for its own account with the present intention of
holding such securities for investment purposes and that it has no intention of
selling such securities in a public distribution in violation of the federal
securities laws or any applicable state securities laws; provided that nothing
contained herein will prevent any Purchaser and the subsequent holders of
Restricted Securities from transferring such securities in compliance with the
provisions of Section 3 hereof. Each certificate for Restricted Securities
will be imprinted with a legend in substantially the following form (the
"Securities Act Legend"):
- ----------------------
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON
JUNE 28, 1995 AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"). THE TRANSFER OF SUCH SECURITIES IS SUBJECT TO THE
---
CONDITIONS SPECIFIED IN THE STOCK PURCHASE AGREE-MENT, DATED AS OF JUNE 28,
1995 BETWEEN THE ISSUER (THE "COMPANY") AND CERTAIN INVESTORS, AND THE
-------
COMPANY RESERVES THE RIGHT TO REFUSE TO TRANSFER SUCH SECURITIES UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. UPON WRITTEN
REQUEST, A COPY OF SUCH CONDITIONS WILL BE FURNISHED BY THE COMPANY TO THE
HOLDER HEREOF WITHOUT CHARGE."
Whenever any of the Restricted Securities cease to be Restricted Securities and
are not otherwise restricted securities, the holder thereof will be entitled to
receive from the Company, without
-5-
<PAGE>
expense, upon surrender to the Company of the certificate repre senting such
Securities, a new certificate representing such Securities of like tenor but not
bearing a legend of the character set forth above.
5B. Other Representations and Warranties of the Purchasers. Each
------------------------------------------------------
Purchaser hereby severally represents and warrants to the Company that:
(i) such Purchaser has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the Common Stock
purchased hereunder and has had full access to such other information concerning
the Company (including access to the Acquisition Agreement and the financing
documents relating thereto) as such Purchaser may have requested and that in
making its decision to invest in the Common Stock being purchased hereunder such
Purchaser is not in any way relying on the fact that any other person has
decided to be a Purchaser hereunder or to invest in the Common Stock;
(ii) such Purchaser (a) is an "accredited investor" as defined in
Rule 501(a) under the Securities Act or (b) by reason of its business and
financial experience, and the business and financial experience of those
retained by it to advise it with respect to its investment in the Common Stock
being purchased hereunder, it, together with such advisors, has such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of its prospective investment in such
Common Stock, is able to bear the economic risk of such investment and, at the
present time, is able to afford a complete loss of such investment; and
(iii) (a) such Purchaser has the requisite power and authority to
purchase the Common Stock to be purchased by it hereunder and has authorized the
purchase of such Common Stock and (b) if the Purchaser is not an individual, the
purchase of the Common Stock being purchased by it hereunder does not violate
its charter, by-laws or other organizational documents.
Section 6. Definitions.
-----------
"Person" means an individual, a partnership, a joint venture, a
------
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
-6-
<PAGE>
"Restricted Securities" means the Common Stock issued hereunder and
---------------------
any securities issued with respect to such Common Stock by way of any stock
dividend or stock split, or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular Restricted Securities, such securities will cease to be Restricted
Securities when they have (a) been effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering them,
(b) become eligible for sale pursuant to Rule 144 or Rule 144A of the Securities
and Exchange Commission (or any similar rules then in force) or (c) been
otherwise transferred and new securities for them not bearing the Securities Act
Legend set forth in Section 5A have been delivered by the Company in accordance
with Section 3B. Whenever any particular securities cease to be Restricted
Securities, the holder thereof will be entitled to receive from the Company,
without expense, new securities of like tenor not bearing a Securities Act
Legend of the character set forth in Section 5A.
"Rule 144" means Rule 144 promulgated by the Securities and Exchange
--------
Commission under the Securities Act as such rule may be amended from time to
time, or any similar rule then in force.
"Rule 144A" means Rule 144A promulgated by the Securities and Exchange
---------
Commission under the Securities Act as such rule may be amended from time to
time, or any similar rule then in force.
"Securities Act" means the Securities Act of 1933, as amended, or
--------------
any similar federal law then in force.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
-----------------------
as amended, or any similar federal law then in force.
"Securities and Exchange Commission" includes any governmental body
----------------------------------
or agency succeeding to the functions thereof.
Section 7. Miscellaneous.
-------------
7A. Remedies. The holders of Common Stock acquired hereunder
--------
(directly or indirectly) will have all of the rights and remedies set forth in
this Agreement and the amended certificate of incorporation, and all of the
rights and remedies which such holders have been granted at any time under any
other agreement or contract, and all of the rights and remedies which such
holders have under any law. Any Person having any rights under any
-7-
<PAGE>
provision of this Agreement will be entitled to enforce such rights
specifically, to recover damages by reason of any breach of any provision of
this Agreement, and to exercise all other rights granted by law.
7B. Amendments and Waivers. Except as otherwise provided herein,
----------------------
no modification, amendment or waiver of any provision hereof shall be effective
against the Company or the Purchasers unless such modification, amendment or
waiver is approved in writing by the Company and the holders of a majority of
the Common Stock purchased hereunder. The failure of any party to enforce any
provision of this Agreement or under any agreement contemplated hereby or under
the amended certificate of incorporation or the bylaws shall in no way be
construed as a waiver of such provisions and shall not affect the right of such
party thereafter to enforce each and every provision of this Agreement, any
agreement referred to herein, the certificate of incorporation, or the bylaws in
accordance with their terms.
7C. Survival of Representations and Warranties. All
------------------------------------------
representations and warranties contained herein or made in writing by any party
in connection herewith will survive the execution and delivery of this
Agreement, regardless of any investigation made by the Company or any Purchaser
or on its behalf.
7D. Successors and Assigns.
----------------------
(i) Except as otherwise expressly provided herein, all covenants and
agreements contained in this Agreement by or on behalf of any of the parties
hereto will bind and inure to the benefit of the respective successors and
assigns of such parties whether so expressed or not. In addition, and whether
or not any express assignment has been made, the provisions of this Agreement
which are for any Purchaser's benefit as the purchaser or holder of Common
Stock, as the case may be, are also for the benefit of and enforceable by any
subsequent holder of such Purchaser's Common Stock.
(ii) If a sale, transfer, assignment or other disposition of any
Common Stock is made in accordance with the provisions of this Agreement to any
Person and such common stock remains Restricted Securities immediately after
such disposition, such Person shall, at or prior to the time such common stock
is acquired, execute a counterpart of this Agreement with such modifications
thereto as may be necessary to reflect such
-8-
<PAGE>
acquisition, and such other documents as are necessary to confirm such Person's
agreement to become a party to, and to be bound by, all covenants, terms and
conditions of this Agreement as theretofore amended.
7E. Severability. Whenever possible, each provision of this
------------
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable under any applicable law or rule in any jurisdiction,
such provision will be ineffective only to the extent of such invalid ity,
illegality or unenforceability in such jurisdiction, without invalidating the
remainder of this Agreement in such jurisdiction or any provision hereof in any
other jurisdiction.
7F. Counterparts. This Agreement may be executed simultaneously
------------
in two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together will constitute
one and the same Agreement.
7G. Descriptive Headings. The descriptive headings of this
--------------------
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
7H. Governing Law. All issues concerning the enforceability,
-------------
validity and binding effect of this Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the law
of any jurisdiction other than the State of Delaware.
7I. Notices. All notices, demands or other communications to be
-------
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given when personally delivered or
received by certified mail, return receipt requested, or sent by guaranteed
overnight courier service. Notices, demands and communications will be sent to
each Purchaser at such Purchaser's address as indicated in the Company's books
and records of the Company's transfer agent and registrar and to the Company at
the addresses indicated below:
-9-
<PAGE>
Notices to Wesley-Jessen Holding, Inc.:
--------------------------------------
Wesley-Jessen Holding, Inc.
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Attention: Stephen G. Pagliuca
Adam W. Kirsch
With a copy to:
--------------
Kirkland & Ellis
200 E. Randolph Drive
Chicago, Illinois 60601
Attention: Karl E. Lutz, P.C.
Jeffrey C. Hammes
or to such other address or to the attention of such other Person as the
recipient party has specified by prior written notice to the sending party.
* * * * *
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase Agreement on the day and year first above written.
WESLEY-JESSEN HOLDING, INC.
By: Thomas F. Steiner
-----------------------------------
Its: Vice President
----------------------------------
BAIN CAPITAL FUND IV, L.P.
By: Bain Capital Partners IV, L.P.
Its: General Partner
By: Bain Capital Investors, Inc.
Its: General Partner
By: Adam W. Kirsch
-----------------------------------
A Managing Director
BAIN CAPITAL FUND IV-B, L.P.
By: Bain Capital Partners IV, L.P.
Its: General Partner
By: Bain Capital Investors, Inc.
Its: General Partner
By: Adam W. Kirsch
-----------------------------------
A Managing Director
BCIP ASSOCIATES
By: Adam W. Kirsch
-----------------------------------
A General Partner
BCIP TRUST ASSOCIATES, L.P.
By: Adam W. Kirsch
-----------------------------------
A General Partner
-11-
<PAGE>
RANDOLPH STREET PARTNERS
By: Jeffrey C. Hammes
-----------------------------------
A General Partner
/s/ Robert A. Sandler
--------------------------------------
Robert Sandler
-12-
<PAGE>
Schedule of Purchasers
----------------------
<TABLE>
<CAPTION>
Shares
------
of Shares
-- ------
Class L Purchase of Purchase Total
------- -------- -- -------- -----
Name Common Price Common Price Investment
---- ------ ----- ------ ----- ----------
<S> <C> <C> <C> <C> <C>
Bain Capital Fund IV, L.P. 165,219 $17.40723 1,486,974 $0.08059 2,995,843.63
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Bain Capital Fund IV-B, L.P. 189,078 $17.40723 1,701,699 $0.08059 3,428,456.37
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
BCIP Associates 46,256 $17.40723 216,498 $0.08059 822,627.28
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
BCIP Trust Associates, L.P. 10,311 $17.40723 292,603 $0.08059 203,072.72
c/o Bain Capital Investors, Inc.
Two Copley Place
Boston, MA 02116
Randolph Street Partners 2,757 $17.40723 24,817 $0.08059 50,000.00
200 E. Randolph Drive
Suite 5600
Chicago, IL 60601
Attn: Karl E. Lutz
Robert Sandler 1,379 $17.40723 12,409 $0.08059 25,000.00
Total 415,000 $17.40723 3,735,000 $0.08059 $ 7,525,000
======= ========= ========= ======== =============
</TABLE>
-13-
<PAGE>
Exhibit 10.6
EXECUTION COPY
--------------
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
---------
as of June 28, 1995, between Wesley-Jessen Corporation (f/k/a WJ Acquisition
Corp.), a Delaware corporation (the "Company"), and Kevin Ryan ("Executive").
------- ---------
The Company is a wholly-owned subsidiary of Wesley-Jessen Holding,
Inc., a Delaware corporation ("Holding"). Holding and Executive are parties to
-------
a Management Agreement dated June 28, 1995 (the "Management Agreement") pursuant
--------------------
to which (i) Holding will sell, and Executive will purchase, certain shares of
Holding's capital stock and (ii) Holding will grant Executive options to acquire
shares of Holding's capital stock.
In consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Employment. The Company shall employ Executive, and Executive
----------
hereby accepts employment with the Company, upon the terms and conditions set
forth in this Agreement for the period beginning on the date hereof and ending
as provided in paragraph 5 hereof (the "Employment Period").
-----------------
2. Position and Duties.
-------------------
(a) During the Employment Period, Executive shall serve as the
President and Chief Executive Officer of the Company and shall have the normal
duties, responsibilities and authority of the President and Chief Executive
Officer, subject to the overall direction and authority of the Company's board
of directors (the "Board").
-----
(b) Executive shall report to the Board, and Executive shall devote
his best efforts and his full business time and attention to the business and
affairs of the Company and its Subsidiaries; provided, that nothing in this
paragraph 2(b) shall prohibit Executive from devoting a reasonable amount of
business time and attention to directorships and charitable or other activities.
<PAGE>
(c) For purposes of this Agreement, "Subsidiaries" shall mean any
------------
corporation of which the securities having a majority of the voting power in
electing directors are, at the time of determination, owned by the Company,
directly or through one or more Subsidiaries.
3. Base Salary and Benefits.
------------------------
(a) During the Employment Period, Executive's base salary shall be at
least $250,000 per annum and shall be subject to review by the Board on an
annual basis (the "Base Salary"), which salary shall be payable in regular
-----------
installments in accordance with the Company's general payroll practices and
shall be subject to customary withholding. In addition, during the Employment
Period, Executive shall be entitled to participate in all of the Company's
employee benefit programs for which senior executive employees of the Company
and its Subsidiaries are generally eligible.
(b) The Company shall reimburse Executive for all reasonable expenses
incurred by him in the course of performing his duties under this Agreement
which are consistent with the Company's policies in effect from time to time
with respect to travel, entertainment and other business expenses, subject to
the Company's requirements with respect to reporting and documentation of such
expenses.
(c) In addition to the Base Salary, Executive will be eligible to
earn an annual target bonus of 50% of the Base Salary to be based upon specific
bonus targets to be established on an annual basis by the Board. Such bonus
targets will generally focus on EBITDA growth, capital expenditure levels and
working capital targets, as well as meeting debt covenant requirements.
4. Board Membership. With respect to all regular elections of
----------------
directors during the Employment Period, the Company shall nominate, and use its
best efforts to elect, Executive to serve as a member of the Board. Upon the
termination of the Employment Period, Executive shall resign as a director of
the Company and its Subsidiaries, as the case may be.
5. Term.
----
(a) The Employment Period (i) shall terminate upon Executive's
resignation, death or Disability (as defined below) and
- 2 -
<PAGE>
(ii) may be terminated by the Company at any time for Cause (as defined below)
or without Cause.
(b) If the Employment Period is terminated by the Company without
Cause during the term of this Agreement, Executive shall be entitled to receive
his (y) Base Salary and benefits described in Section 3(a) above, in each case
for 12 months after the date of such termination, and (z) bonus described in
Section 3(c) above for the fiscal year in which such termination occurs if
Executive would have otherwise been entitled to receive such bonus had he not
been terminated; provided, that if the date of such termination occurs prior to
the last day of the fiscal year in respect of which such bonus is awarded, then
such bonus shall be prorated based upon the number of days elapsed prior to
Executive's date of termination. Any such amounts payable under this Section
5(b) will be payable at such times as such amounts would have been payable had
Executive not been terminated. Notwithstanding anything in this Agreement to
the contrary, the Company shall have no obligation to pay any amounts payable
under this Section 5(b) during such times as Executive is in breach of paragraph
6, 7, or 8 hereof or any provision of the Management Agreement. The amounts
otherwise payable pursuant to this paragraph 5(b) shall be reduced by the amount
of any compensation Executive receives with respect to any other employment
during the 12 month period commencing on the date of Executive's termination.
Upon request from time to time, Executive shall furnish the Company with a true
and complete certificate specifying any such compensation due to or received by
him. As a condition to the Company's obligations (if any) to make severance
payments pursuant to this paragraph 5(b), Executive will execute and deliver a
general release in form and substance satisfactory to the Company.
(c) If the Employment Period is terminated by the Company for Cause
or is terminated pursuant to clause (a)(i) above, Executive shall be entitled to
receive his Base Salary through the date of termination.
(d) Except as otherwise provided in Section 5(b), all of Executive's
rights to fringe benefits and bonuses hereunder (if any) which accrue or become
payable after the termination of the Employment Period shall cease upon such
termination. The Company may offset any amounts Executive owes it or its
Subsidiaries against any amounts it owes Executive hereunder.
- 3 -
<PAGE>
(e) For purposes of this Agreement, "Disability" (i) shall mean any
----------
physical or mental incapacitation which results in Executive's inability to
perform his duties and responsibilities for the Company for a total of 120 days
during any twelve-month period, as determined by the Board in its good faith
judgment and (ii) shall be deemed to have occurred on the 120th day of such
inability to perform.
(f) For purposes of this Agreement, "Cause" shall mean (i) the
-----
commission of a felony or any other act or omission involving dishonesty,
disloyalty or fraud with respect to the Company or any of its Subsidiaries or
any of their customers or suppliers, (ii) conduct tending to bring the Company
or any of its Subsidiaries into substantial public disgrace or disrepute, (iii)
substantial and repeated failure to perform duties as reasonably directed by the
Board, (iv) gross negligence or willful misconduct with respect to the Company
or any of its Subsidiaries or (v) any other material breach of this Agreement or
the Management Agreement.
6. Confidential Information. Executive acknowledges that the
------------------------
information, observations and data obtained by him while employed by the Company
and its Subsidiaries concerning the business or affairs of the Company or any of
its Subsidiaries ("Confidential Information") are the property of the Company or
------------------------
such Subsidiary. Therefore, Executive agrees that he shall not disclose to any
unauthorized person or use for his own purposes any Confidential Information
without the prior written consent of the Board, unless and to the extent that
the aforementioned matters become generally known to and available for use by
the public other than as a result of Executive's acts or omissions. Executive
shall deliver to the Company at the termination of the Employment Period, or at
any other time the Company may request, all memoranda, notes, plans, records,
reports, computer tapes, printouts and software and other documents and data
(and copies thereof) relating to the Confidential Information, Work Product (as
defined below) or the business of the Company or any Subsidiary which he may
then possess or have under his control.
7. Inventions and Patents. Executive acknowledges that all
----------------------
inventions, innovations, improvements, developments, methods, designs, analyses,
drawings, reports and all similar or related information (whether or not
patentable) which relate to the Company's or any of its Subsidiaries' actual or
anticipated business, research and development or existing or future products
- 4 -
<PAGE>
or services and which are conceived, developed or made by Executive while
employed by the Company and its Subsidiaries ("Work Product") belong to the
------------
Company or such Subsidiary. Executive shall promptly disclose such Work Product
to the Board and perform all actions reasonably requested by the Board (whether
during or after the Employment Period) to establish and confirm such ownership
(including, without limitation, assignments, consents, powers of attorney and
other instruments).
8. Non-Compete, Non-Solicitation.
-----------------------------
(a) In further consideration of the compensation to be paid to
Executive hereunder, Executive acknowledges that in the course of his employment
with the Company he shall become familiar with the Company's trade secrets and
with other Confidential Information concerning the Company and its Subsidiaries
and that his services shall be of special, unique and extraordinary value to the
Company and its Subsidiaries. Therefore, Executive agrees that, during the
Employment Period and for one year thereafter (the "Noncompete Period"), he
-----------------
shall not directly or indirectly own any interest in, manage, control,
participate in, consult with, render services for, or in any manner engage in
the design, manufacture or sale of contact lenses anywhere in North America or
in any other country in which the Company or its Subsidiaries conduct business.
Nothing herein shall prohibit Executive from being a passive owner of not more
than 2% of the outstanding stock of any class of a corporation which is publicly
traded, so long as Executive has no active participation in the business of such
corporation.
(b) During the Noncompete Period, Executive shall not directly or
indirectly through another entity (i) induce or attempt to induce any employee
of the Company or any Subsidiary to leave the employ of the Company or such
Subsidiary, or in any way interfere with the relationship between the Company or
any Subsidiary and any employee thereof, (ii) hire any person who was an
employee of the Company or any Subsidiary at any time during the Employment
Period or (iii) induce or attempt to induce any customer, supplier, licensee,
licensor, franchisee or other business relation of the Company or any Subsidiary
to cease doing business with the Company or such Subsidiary, or in any way
interfere with the relationship between any such customer, supplier, licensee or
business relation and the Company or any
- 5 -
<PAGE>
Subsidiary (including, without limitation, making any negative statements or
communications about the Company or its Subsidiaries).
9. Enforcement. If, at the time of enforcement of paragraph 6, 7 or
-----------
8 of this Agreement, a court holds that the restrictions stated herein are
unreasonable under circumstances then existing, the parties hereto agree that
the maximum period, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area.
Because Executive's services are unique and because Executive has access to
Confidential Information and Work Product, the parties hereto agree that money
damages would not be an adequate remedy for any breach of this Agreement.
Therefore, in the event a breach or threatened breach of this Agreement, the
Company or its successors or assigns may, in addition to other rights and
remedies existing in their favor, apply to any court of competent jurisdiction
for specific performance and/or injunctive or other relief in order to enforce,
or prevent any violations of, the provisions hereof (without posting a bond or
other security). In addition, in the event of an alleged breach or violation by
Executive of paragraph 8, the Noncompete Period shall be tolled until such
breach or violation has been duly cured. Executive agrees that the restrictions
contained in paragraph 8 are reasonable.
10. Other Businesses. As long as Executive is employed by the
----------------
Company or any of its Subsidiaries, Executive agrees that he will not, except
with the express written consent of the Board, become engaged in, or render
services for, any business other than the business of the Company, any of its
Subsidiaries or any corporation or partnership in which the Company or any of
its Subsidiaries have an equity interest; provided, that nothing in this
paragraph 10 shall prohibit Executive from devoting a reasonable amount of
business time and attention to directorships and charitable or other activities.
11. Executive's Representations. Executive hereby represents and
---------------------------
warrants to the Company that (i) the execution, delivery and performance of this
Agreement by Executive do not and will not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Executive is a party or by which he is bound, (ii) Executive is
not a party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity and (iii) upon the
execution and delivery of this Agreement
- 6 -
<PAGE>
by the Company, this Agreement shall be the valid and binding obligation of
Executive, enforceable in accordance with its terms. Executive hereby
acknowledges and represents that he has consulted with independent legal counsel
regarding his rights and obligations under this Agreement and that he fully
understands the terms and conditions contained herein.
12. Survival. Paragraphs 6, 7 and 8 shall survive and continue in
--------
full force in accordance with their terms notwithstanding any termination of
the Employment Period.
13. Notices. Any notice provided for in this Agreement shall be in
-------
writing and shall be either personally delivered, or mailed by first class mail,
return receipt requested, to the recipient at the address below indicated:
Notices to Executive:
--------------------
Kevin Ryan
1501 East Central Road
#317
Arlington Heights, Illinois 60005
Notices to the Company:
----------------------
Wesley-Jessen Corporation
c/o Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Attn: Stephen G. Pagliuca
Adam W. Kirsch
With a copy to:
--------------
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey C. Hammes
Gary M. Holihan
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement shall be deemed to have been given when so delivered
or mailed.
- 7 -
<PAGE>
14. Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
15. Complete Agreement. This Agreement, those documents expressly
------------------
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
16. No Strict Construction. The language used in this Agreement
----------------------
shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
party.
17. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
18. Successors and Assigns. This Agreement is intended to bind and
----------------------
inure to the benefit of and be enforceable by Executive, the Company and their
respective heirs, successors and assigns, except that Executive may not assign
his rights or delegate his obligations hereunder without the prior written
consent of the Company.
19. Choice of Law. All issues and questions concerning the
-------------
construction, validity, enforcement and interpretation of this Agreement and the
exhibits and schedules hereto shall be governed by, and construed in accordance
with, the laws of the State of Illinois, without giving effect to any choice of
law or conflict of law rules or provisions (whether of the State of Illinois or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Illinois.
- 8 -
<PAGE>
20. Amendment and Waiver. The provisions of this Agreement may be
--------------------
amended or waived only with the prior written consent of the Company and
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity, binding effect or
enforceability of this Agreement.
* * * * *
- 9 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
WESLEY-JESSEN CORPORATION
By: Edward J. Kelley
--------------------------
Its: Chief Financial Officer
--------------------------
/s/ Kevin Ryan
------------------------------
KEVIN RYAN
- 10 -
<PAGE>
Exhibit 10.7
EXECUTION COPY
--------------
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
---------
as of June 28, 1995, between Wesley-Jessen Corporation (f/k/a WJ Acquisition
Corp.), a Delaware corporation (the "Company"), and Edward J. Kelley
-------
("Executive"). The Company is a wholly-owned subsidiary of Wesley-Jessen
---------
Holding, Inc., a Delaware corporation ("Holding"). Holding and Executive are
-------
parties to a Management Agreement dated June 28, 1995 (the "Management
----------
Agreement") pursuant to which (i) Holding will sell, and Executive will
purchase, certain shares of Holding's capital stock and (ii) Holding will grant
Executive options to acquire shares of Holding's capital stock.
In consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Employment. The Company shall employ Executive, and Executive
----------
hereby accepts employment with the Company, upon the terms and conditions set
forth in this Agreement for the period beginning on the date hereof and ending
as provided in paragraph 4 hereof (the "Employment Period").
-----------------
2. Position and Duties.
-------------------
(a) During the Employment Period, Executive shall serve as the Vice
President and Chief Financial Officer of the Company and shall have the normal
duties, responsibilities and authority of the Vice President and Chief Financial
Officer, subject to the overall direction and authority of the Company's board
of directors (the "Board") and the Company's president and chief executive
-----
officer.
(b) Executive shall report to the Company's president and chief
executive officer, and Executive shall devote his best efforts and his full
business time and attention to the business and affairs of the Company and its
Subsidiaries; provided, that nothing in this paragraph 2(b) shall prohibit
Executive from
<PAGE>
devoting a reasonable amount of business time and attention to directorships and
charitable or other activities.
(c) For purposes of this Agreement, "Subsidiaries" shall mean any
------------
corporation of which the securities having a majority of the voting power in
electing directors are, at the time of determination, owned by the Company,
directly or through one or more Subsidiaries.
3. Base Salary and Benefits.
------------------------
(a) During the Employment Period, Executive's base salary shall be at
least $175,000 per annum and shall be subject to review by the Board on an
annual basis (the "Base Salary"), which salary shall be payable in regular
-----------
installments in accordance with the Company's general payroll practices and
shall be subject to customary withholding. In addition, during the Employment
Period, Executive shall be entitled to participate in all of the Company's
employee benefit programs for which senior executive employees of the Company
and its Subsidiaries are generally eligible.
(b) The Company shall reimburse Executive for all reasonable expenses
incurred by him in the course of performing his duties under this Agreement
which are consistent with the Company's policies in effect from time to time
with respect to travel, entertainment and other business expenses, subject to
the Company's requirements with respect to reporting and documentation of such
expenses.
(c) The Company shall reimburse Executive for all reasonable
relocation expenses incurred by him in the course of relocating his primary
residence to Chicago, Illinois or the surrounding metropolitan area, subject to
the Company's requirements with respect to reporting and documentation of such
expenses.
(d) In addition to the Base Salary, Executive will be eligible to earn
an annual target bonus of 50% of the Base Salary to be based upon specific bonus
targets to be established on an annual basis by the Board. Such bonus targets
will generally focus on EBITDA growth, capital expenditure levels and working
capital targets, as well as meeting debt covenant requirements.
4. Term.
----
- 2 -
<PAGE>
(a) The Employment Period (i) shall terminate upon Executive's
resignation, death or Disability (as defined below) and (ii) may be terminated
by the Company at any time for Cause (as defined below) or without Cause.
(b) If the Employment Period is terminated by the Company without
Cause during the term of this Agreement, Executive shall be entitled to receive
his (y) Base Salary and benefits described in Section 3(a) above, in each case
for 12 months after the date of such termination, and (z) bonus described in
Section 3(d) above for the fiscal year in which such termination occurs if
Executive would have otherwise been entitled to receive such bonus had he not
been terminated; provided, that if the date of such termination occurs prior to
the last day of the fiscal year in respect of which such bonus is awarded, then
such bonus shall be prorated based upon the number of days elapsed prior to
Executive's date of termination. Any such amounts payable under this Section
4(b) will be payable at such times as such amounts would have been payable had
Executive not been terminated. Notwithstanding anything in this Agreement to the
contrary, the Company shall have no obligation to pay any amounts payable under
this Section 4(b) during such times as Executive is in breach of paragraph 5, 6
or 7 hereof or any provision of the Management Agreement. The amounts otherwise
payable pursuant to this paragraph 4(b) shall be reduced by the amount of any
compensation Executive receives with respect to any other employment during the
12 month period commencing on the date of Executive's termination. Upon request
from time to time, Executive shall furnish the Company with a true and complete
certificate specifying any such compensation due to or received by him. As a
condition to the Company's obligations (if any) to make severance payments
pursuant to this paragraph 4(b), Executive will execute and deliver a general
release in form and substance satisfactory to the Company.
(c) If the Employment Period is terminated by the Company for Cause or
is terminated pursuant to clause (a)(i) above, Executive shall be entitled to
receive his Base Salary through the date of termination.
(d) Except as otherwise provided in Section 4(b), all of Executive's
rights to fringe benefits and bonuses hereunder (if any) which accrue or become
payable after the termination of the Employment Period shall cease upon such
termination. The Company may offset any amounts Executive owes it or its
Subsidiaries against any amounts it owes Executive hereunder.
- 3 -
<PAGE>
(e) For purposes of this Agreement, "Disability" (i) shall mean any
----------
physical or mental incapacitation which results in Executive's inability to
perform his duties and responsibilities for the Company for a total of 120 days
during any twelve-month period, as determined by the Board in its good faith
judgment and (ii) shall be deemed to have occurred on the 120th day of such
inability to perform.
(f) For purposes of this Agreement, "Cause" shall mean (i) the
-----
commission of a felony or any other act or omission involving dishonesty,
disloyalty or fraud with respect to the Company or any of its Subsidiaries or
any of their customers or suppliers, (ii) conduct tending to bring the Company
or any of its Subsidiaries into substantial public disgrace or disrepute, (iii)
substantial and repeated failure to perform duties as reasonably directed by the
Board, (iv) gross negligence or willful misconduct with respect to the Company
or any of its Subsidiaries or (v) any other material breach of this Agreement
or the Management Agreement.
5. Confidential Information. Executive acknowledges that the
------------------------
information, observations and data obtained by him while employed by the Company
and its Subsidiaries concerning the business or affairs of the Company or any of
its Subsidiaries ("Confidential Information") are the property of the Company or
------------------------
such Subsidiary. Therefore, Executive agrees that he shall not disclose to any
unauthorized person or use for his own purposes any Confidential Information
without the prior written consent of the Board, unless and to the extent that
the aforementioned matters become generally known to and available for use by
the public other than as a result of Executive's acts or omissions. Executive
shall deliver to the Company at the termination of the Employment Period, or at
any other time the Company may request, all memoranda, notes, plans, records,
reports, computer tapes, printouts and software and other documents and data
(and copies thereof) relating to the Confidential Information, Work Product (as
defined below) or the business of the Company or any Subsidiary which he may
then possess or have under his control.
6. Inventions and Patents. Executive acknowledges that all
----------------------
inventions, innovations, improvements, developments, methods, designs, analyses,
drawings, reports and all similar or related information (whether or not
patentable) which relate to the Company's or any of its Subsidiaries' actual or
anticipated business, research and development or existing or future products
- 4 -
<PAGE>
or services and which are conceived, developed or made by Executive while
employed by the Company and its Subsidiaries ("Work Product") belong to the
------------
Company or such Subsidiary. Executive shall promptly disclose such Work Product
to the Board and perform all actions reasonably requested by the Board (whether
during or after the Employment Period) to establish and confirm such ownership
(including, without limitation, assignments, consents, powers of attorney and
other instruments).
7. Non-Compete, Non-Solicitation.
-----------------------------
(a) In further consideration of the compensation to be paid to
Executive hereunder, Executive acknowledges that in the course of his employment
with the Company he shall become familiar with the Company's trade secrets and
with other Confidential Information concerning the Company and its Subsidiaries
and that his services shall be of special, unique and extraordinary value to the
Company and its Subsidiaries. Therefore, Executive agrees that, during the
Employment Period and for one year thereafter (the "Noncompete Period"), he
-----------------
shall not directly or indirectly own any interest in, manage, control,
participate in, consult with, render services for, or in any manner engage in
the design, manufacture or sale of contact lenses anywhere in North America or
in any other country in which the Company or its Subsidiaries conduct business.
Nothing herein shall prohibit Executive from being a passive owner of not more
than 2% of the outstanding stock of any class of a corporation which is publicly
traded, so long as Executive has no active participation in the business of such
corporation.
(b) During the Noncompete Period, Executive shall not directly or
indirectly through another entity (i) induce or attempt to induce any employee
of the Company or any Subsidiary to leave the employ of the Company or such
Subsidiary, or in any way interfere with the relationship between the Company or
any Subsidiary and any employee thereof, (ii) hire any person who was an
employee of the Company or any Subsidiary at any time during the Employment
Period or (iii) induce or attempt to induce any customer, supplier, licensee,
licensor, franchisee or other business relation of the Company or any Subsidiary
to cease doing business with the Company or such Subsidiary, or in any way
interfere with the relationship between any such customer, supplier, licensee or
business relation and the Company or any
- 5 -
<PAGE>
Subsidiary (including, without limitation, making any negative statements or
communications about the Company or its Subsidiaries).
8. Enforcement. If, at the time of enforcement of paragraph 5, 6 or
-----------
7 of this Agreement, a court holds that the restrictions stated herein are
unreasonable under circumstances then existing, the parties hereto agree that
the maximum period, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area.
Because Executive's services are unique and because Executive has access to
Confidential Information and Work Product, the parties hereto agree that money
damages would not be an adequate remedy for any breach of this Agreement.
Therefore, in the event a breach or threatened breach of this Agreement, the
Company or its successors or assigns may, in addition to other rights and
remedies existing in their favor, apply to any court of competent jurisdiction
for specific performance and/or injunctive or other relief in order to enforce,
or prevent any violations of, the provisions hereof (without posting a bond or
other security). In addition, in the event of an alleged breach or violation by
Executive of paragraph 7, the Noncompete Period shall be tolled until such
breach or violation has been duly cured. Executive agrees that the restrictions
contained in paragraph 7 are reasonable.
9. Other Businesses. As long as Executive is employed by the Company
----------------
or any of its Subsidiaries, Executive agrees that he will not, except with the
express written consent of the Board, become engaged in, or render services for,
any business other than the business of the Company, any of its Subsidiaries or
any corporation or partnership in which the Company or any of its Subsidiaries
have an equity interest; provided, that nothing in this paragraph 9 shall
prohibit Executive from devoting a reasonable amount of business time and
attention to directorships and charitable or other activities.
10. Executive's Representations. Executive hereby represents and
---------------------------
warrants to the Company that (i) the execution, delivery and performance of this
Agreement by Executive do not and will not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Executive is a party or by which he is bound, (ii) Executive is
not a party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity and (iii) upon the
execution and delivery of this Agreement
- 6 -
<PAGE>
by the Company, this Agreement shall be the valid and binding obligation of
Executive, enforceable in accordance with its terms. Executive hereby
acknowledges and represents that he has consulted with independent legal counsel
regarding his rights and obligations under this Agreement and that he fully
understands the terms and conditions contained herein.
11. Survival. Paragraphs 5, 6 and 7 shall survive and continue in
--------
full force in accordance with their terms notwithstand ing any termination of
the Employment Period.
12. Notices. Any notice provided for in this Agreement shall be in
-------
writing and shall be either personally delivered, or mailed by first class mail,
return receipt requested, to the recipient at the address below indicated:
Notices to Executive:
--------------------
Edward J. Kelley
1501 East Central Road
#117
Arlington Heights, Illinois 60005
Notices to the Company:
----------------------
Wesley-Jessen Corporation
c/o Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Attn: Stephen G. Pagliuca
Adam W. Kirsch
With a copy to:
--------------
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey C. Hammes
Gary M. Holihan
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement shall be deemed to have been given when so delivered
or mailed.
- 7 -
<PAGE>
13. Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
14. Complete Agreement. This Agreement, those documents expressly
------------------
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
15. No Strict Construction. The language used in this Agreement
----------------------
shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
party.
16. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
17. Successors and Assigns. This Agreement is intended to bind and
----------------------
inure to the benefit of and be enforceable by Execu tive, the Company and their
respective heirs, successors and assigns, except that Executive may not assign
his rights or delegate his obligations hereunder without the prior written
consent of the Company.
18. Choice of Law. All issues and questions concerning the
-------------
construction, validity, enforcement and interpretation of this Agreement and the
exhibits and schedules hereto shall be governed by, and construed in accordance
with, the laws of the State of Illinois, without giving effect to any choice of
law or conflict of law rules or provisions (whether of the State of Illinois or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Illinois.
- 8 -
<PAGE>
19. Amendment and Waiver. The provisions of this Agreement may be
--------------------
amended or waived only with the prior written consent of the Company and
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity, binding effect or
enforceability of this Agreement.
* * * * *
- 9 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
WESLEY-JESSEN CORPORATION
By: Kevin J. Ryan
----------------------------
Its: President
---------------------------
/s/ Edward J. Kelley
------------------------------
EDWARD J. KELLEY
- 10 -
<PAGE>
EXHIBIT 10.10
EXECUTION COPY
--------------
MANAGEMENT AGREEMENT
--------------------
MANAGEMENT AGREEMENT (this "Agreement") effective as of June 28, 1995 and
---------
dated as of April 5, 1996 by and between Wesley-Jessen Holding, Inc., a Delaware
corporation (the "Company") and Kevin Ryan ("Executive").
------- ---------
Pursuant to the Individual Retirement Account Agreement by and among
Executive, the Company and Pershing Division of Donaldson, Lufkin & Jenrette
Securities Corp. (the "IRA Agreement") and the Company's 1995 Stock Purchase and
-------------
Option Plan (the "Plan"), Executive shall direct the custodian or trustee (the
----
"Trustee") of the Individual Retirement Account for the benefit of Kevin Ryan
- --------
(the "IRA") to acquire for the benefit of the IRA and the Company will sell
---
7,500 shares of the Company's Class L Common Stock, par value $.01 per share
(the "Class L Common") and 67,500 shares of the Company's Common Stock, par
--------------
value $.01 per share (the "Common" and together with the Class L Common, the
------
"Common Stock"). All of such shares of Common Stock and all shares of Common
- -------------
Stock hereafter acquired by the IRA or Executive are referred to herein as
"Executive Stock." In addition, the Company desires to grant to Executive
- ----------------
options to acquire 325,000 shares of Common, which options shall be divided into
three grants, two grants for 100,000 shares of Common which will be based on
performance targets and will have different exercise prices (the "Target
------
Options") and one grant for 125,000 shares of Common which will be subject to
- -------
time vesting (the "Time Option"). The Target Options and the Time Option are
-----------
hereinafter referred to individually as an "Option" and collectively as the
------
"Options."
- --------
The parties hereto agree as follows:
STOCK AND OPTION PROVISIONS
1. Purchase and Sale of Stock.
--------------------------
(a) Upon execution of this Agreement, Executive will direct the Trustee
to purchase for the benefit of the IRA, and the Company will sell, 7,500 shares
of Class L Common at a price of $17.40723 per share and 67,500 shares of Common
at a price of $0.08059 per share, for an aggregate purchase price of
$135,994.05. The Company will deliver to the Trustee certificates representing
such shares of Executive Stock, and, upon receipt of such certificates,
Executive will direct the Trustee to deliver to the Company a certified check or
wire transfer of funds in the amount of $135,994.05.
<PAGE>
(b) Representations and Warranties. In connection with the purchase and
------------------------------
sale of the Executive Stock hereunder and pursuant to the IRA Agreement,
Executive represents and warrants to the Company that:
(i) The Executive Stock to be acquired by the Trustee and Executive
pursuant to this Agreement and the IRA Agreement will be acquired for
Executive's own account and not with a view to, or intention of, distribution
thereof in violation of the Securities Act of 1933, as amended (the "1933
----
Act"), or any applicable state securities laws, and the Executive Stock will
---
not be disposed of in contravention of the 1933 Act or any applicable state
securities laws.
(ii) Executive is an executive officer of the Company or its
Subsidiaries, is sophisticated in financial matters and is able to evaluate
the risks and benefits of the investment in the Executive Stock.
(iii) Executive is able to bear the economic risk of his investment
in the Executive Stock for an indefinite period of time because the Executive
Stock has not been registered under the 1933 Act and, therefore, cannot be
sold unless subsequently registered under the 1933 Act or an exemption from
such registration is available.
(iv) Executive has had an opportunity to ask questions and receive answers
concerning the terms and conditions of the offering of Executive Stock and
has had full access to such other information concerning the Company and its
Subsidiaries as he has requested. Executive has reviewed, or has had an
opportunity to review, a copy of that certain Purchase and Sale Agreement,
dated as of May 5, 1995, between the Company's wholly-owned subsidiary,
Wesley-Jessen Corporation (f/k/a WJ Acquisition Corp.), a Delaware
corporation ("Buyer") and Schering Corporation, pursuant to which Buyer
-----
has agreed to acquire all of the Assets (as such term is defined therein),
and Executive is familiar with the transactions contemplated thereby.
Executive has also reviewed, or has had an opportunity to review the
Company's Certificate of Incorporation (a copy of which is attached hereto
as Exhibit A) and bylaws and the loan agreements, notes and related docu-
---------
ments with Buyer's lenders.
(v) This Agreement constitutes the legal, valid and binding obligation of
Executive, enforceable in accordance with its terms, and the execution,
delivery and performance of this Agreement by Executive does not and will not
conflict with, violate or cause a breach of any agreement, contract or
- 2 -
<PAGE>
instrument to which Executive is a party or any judgment, order or decree to
which Executive is subject.
(vi) Executive alone has full power and control with respect to the
investment of the IRA assets and will not transfer, pledge or attempt to
transfer or pledge control of the IRA or any asset therein to any other
person without the express written consent of the Company.
(vii) Executive will direct and will cause the IRA and the Trustee to
take any actions necessary to comply with all provisions of this Agreement
relating to the obligations of the holders of Executive Stock.
(c) Acknowledgement. As an inducement to the Company to sell the Execu-
---------------
tive Stock to Executive and/or the IRA, and as a condition thereto, Executive
acknowledges and agrees that:
(i) the Company will have no duty or obligation to disclose to
Executive, and Executive will have no right to be advised of, any material
information regarding the Company or its Subsidiaries at any time prior to,
upon or in connection with the repurchase of Executive Stock upon the
termination of Executive's employment with the Company or its Subsidiaries or
as otherwise provided hereunder; and
(ii) neither the issuance of the Executive Stock to Executive or the IRA
nor any provision contained herein shall entitle Executive to remain in the
employment of the Company or its Subsidiaries or affect the right of the
Company to terminate Executive's employment at any time for any reason.
2. Stock Options.
-------------
(a) Definitions. The following terms are defined as follows:
-----------
"Independent Third Party" means any Person who, immediately prior to the
-----------------------
contemplated transaction, does not own in excess of 10% of the Company's common
stock on a fully diluted basis, who is not controlling, controlled by or under
common control with any such 10% owner of the Company's common stock and who is
not the spouse or descendant (by birth or adoption) of any such 10% owner of the
Company's common stock.
"Investors" means Bain Capital Fund IV, L.P., Bain Capital Fund IV-B,
---------
L.P., BCIP Associates, BCIP Trust Associates, L.P., Randolph Street Partners
and Robert Sandler.
- 3 -
<PAGE>
"Person" means an individual, a partnership, a joint venture, a
------
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
"Sale of the Company" means any transaction involving the Company and an
-------------------
Independent Third Party or affiliated group of Independent Third Parties
pursuant to which such party or parties acquire (i) a majority of the
outstanding shares of capital stock of the Company entitled to vote generally in
the election of Company's board of directors (whether by merger, consolidation
or sale or transfer of the Company's capital stock) or (ii) all or substantially
all of the Company's assets determined on a consolidated basis (for purposes
hereof "all or substantially all" shall have the meaning given such phrase in
the Revised Model Business Corporation Act).
(b) Time Option.
-----------
(i) Time Option Grant. The Company hereby grants to Executive, pur-
-----------------
suant to the Plan, the Time Option to purchase 125,000 shares of Common ("Time
----
Option Shares"), at a price per share of $0.08059 (the "Time Option Price").
- ------------- -----------------
The Time Option Price and the number of Time Option Shares will be equitably
adjusted for any stock split, stock dividend, reclassification or
recapitalization of the Company which occurs subsequent to the date of this
Agreement. The Time Option will expire on the close of business on the tenth
anniversary of the date hereof (the "Expiration Date"), subject to earlier
---------------
expiration in connection with the termination of Executive's employment, as
provided in Section 2(d) below. The Time Option is not intended to be an
"incentive stock option" within the meaning of Section 422A of the Internal
Revenue Code of 1986, as amended and the regulations promulgated thereunder (the
"Code").
----
(ii) Exercisability. On each date set forth below the Time Option will
--------------
have vested and become exercisable with respect to the cumulative percentage of
Time Option Shares set forth opposite such date if Executive is, and has been,
continuously employed by the Company or its Subsidiaries from the date of this
Agreement through such date:
<TABLE>
<CAPTION>
Cumulative Percentage
of Time Option
Date Shares Vested
---- -------------
<S> <C>
June 28, 1996 25%
June 28, 1997 50%
June 28, 1998 75%
June 28, 1999 100%
</TABLE>
- 4 -
<PAGE>
; provided that upon the occurrence of an Acceleration Event (as defined below),
all of the Time Option Shares will immediately vest and become exercisable. For
the purposes of this Agreement, an "Acceleration Event" will be the first to
------------------
occur of (i) a Sale of the Company or (ii) on any date subsequent to the date
that (A) the Company sells any shares of its common stock pursuant to a
registration statement filed under the 1933 Act and (B) the Investors cease to
own in the aggregate at least 20% of the outstanding common stock of the
Company.
(c) Target Options.
--------------
(i) Target Option Grants. The Company hereby grants to Executive,
--------------------
pursuant to the Plan, the Target Options to purchase up to (A) 100,000 shares of
Common (the "Tranche I Options") with an exercise price per share of $3.70 (the
-----------------
"Tranche I Price") and (B) 100,000 shares of Common (the "Tranche II Options"),
- ---------------- ------------------
with an exercise price per share of $7.33 (the "Tranche II Price"). The shares
----------------
issued upon exercise of the Tranche I Options or the Tranche II Options are
referred to herein as the "Target Option Shares." The number of Target Option
--------------------
Shares, the Tranche I Price and the Tranche II Price will be equitably adjusted
for any stock split, stock dividend, reclassification or recapitalization of the
Company which occurs subsequent to the date of this Agreement. The Target
Options will expire on the Expiration Date, subject to earlier expiration in
connection with the termination of Executive's employment, as provided in
Section 2(d) below. The Target Options are not intended to be an "incentive
stock options" within the meaning of Section 422A of the Code.
(ii) Exercisability. The Target Options are vested and immediately
--------------
exercisable.
(d) Early Expiration Upon Termination of Employment. Any portion of the
-----------------------------------------------
Options that has not vested and become exercisable prior to the Termination Date
(as defined in Section 3(b) below), will expire on the Termination Date and may
not be exercised under any circumstance. Any portion of the Options that has
vested and become exercisable prior to the Termination Date will expire on the
earlier of (i) 30 days after the Termination Date or (ii) the tenth anniversary
of the date of this Agreement.
(e) Procedure for Exercise. At any time after all or any portion of the
----------------------
Options have become exercisable with respect to any Option Shares (as defined in
Section 3(a) hereof) and prior to the Expiration Date (except as provided for in
Section 2(d) above), Executive may exercise all or a portion of the Options with
respect to Option Shares vested pursuant to paragraph 2(b)(ii) or 2(c)(ii) above
by delivering written notice of exercise to the Company,
- 5 -
<PAGE>
together with (i) a written acknowledgment that Executive has read and has been
afforded an opportunity to ask questions of management of the Company regarding
all financial and other information provided to Executive regarding the Company
and (ii) payment in full by delivery of a cashier's, personal or certified check
or wire transfer of immediately available funds in the amount (the "Option
------
Price") equal to the product of (i) in the case of the Time Option, (A) the Time
- -----
Option Price multiplied by (B) the number of Time Option Shares to be acquired;
(ii) in the case of the Tranche I Option, (A) the Tranche I Price multiplied by
(B) the number of Tranche I Option Shares to be acquired; and (iii) in the case
of the Tranche II Option, (A) the Tranche II Price multiplied by (B) the number
of Tranche II Option Shares to be acquired. As a condition to any exercise of
the Options, Executive will permit the Company to deliver to him all financial
and other information regarding the Company and its Subsidiaries which it
believes necessary to enable Executive to make an informed investment decision.
(f) Securities Laws Restrictions. Executive represents that when
----------------------------
Executive exercises any of the Options he will be pur chasing Option Shares for
Executive's own account and not on behalf of others. Executive understands and
acknowledges that federal and state securities laws govern and restrict
Executive's right to offer, sell or otherwise dispose of any Option Shares
unless Executive's offer, sale or other disposition thereof is registered under
the 1933 Act and state securities laws or, in the opinion of the Company's
counsel, such offer, sale or other disposition is exempt from registration
thereunder. Executive agrees that he will not offer, sell or otherwise dispose
of any Option Shares in any manner which would: (i) require the Company to file
any regi stration statement (or similar filing under state law) with the
Securities and Exchange Commission or to amend or supplement any such filing or
(ii) violate or cause the Company to violate the 1933 Act, the rules and
regulations promulgated thereunder or any other state or federal law. Executive
further understands that the certificates for any Option Shares which Executive
purchases will bear the legend set forth in paragraph 5 hereof or such other
legends as the Company deems necessary or desirable in connection with the 1933
Act or other rules, regulations or laws.
(g) Non-Transferability of Options. The Options are personal to
------------------------------
Executive and are not transferable by Executive except pursuant to the laws of
descent or distribution. Only Executive or his legal guardian or representative
may exercise the Options.
3. Repurchase Option.
-----------------
- 6 -
<PAGE>
(a) Definitions. The following terms are defined as follows:
-----------
"Fair Market Value" of each share of Executive Stock means the market
-----------------
value as determined in good faith by the Board.
"Managers" means Edward J. Kelley, so long as each such person is employed
--------
by the Company or any of its Subsidiaries.
"Option Shares" means the Time Option Shares and the Target Option Shares.
-------------
For purposes of this paragraph 3 and paragraph 4, Option Shares issued upon
exercise of any Options will be deemed to be Executive Stock.
"Original Value" of each share of Executive Stock will be equal to
--------------
$17.40723 for each share of Class L Common, and the price paid by Executive
and/or the IRA for each share of Common (as proportionally adjusted for all
stock splits, stock dividends and other recapitalizations affecting the Class L
Common or the Common, as the case may be, subsequent to the date hereof).
"Subsidiary" means any corporation of which shares of stock having a
----------
majority of the general voting power in electing the board of directors are, at
the time as of which any determination is being made, owned by the Company
either directly or through its Subsidiaries.
(b) Repurchase Option. In the event that Executive is no longer employed
-----------------
by the Company or any of its Subsidiaries for any reason (the date of such
termination being referred to herein as the "Termination Date"), the Executive
----------------
Stock, whether held by Executive, the IRA or one or more transferees, will be
subject to repurchase by the Company, the Investors and the Managers (each of
the aforementioned, solely at their option) pursuant to the terms and conditions
set forth in this paragraph 3 (the "Repurchase Option").
-----------------
(c) Repurchase Price. If Executive is no longer employed by the Company
----------------
or any of its Subsidiaries for any reason, then on or after the Termination
Date, the Company may elect to purchase all or any portion of the Executive
Stock at a price per share equal to the Fair Market Value thereof.
(d) Repurchase Procedures. The Company may elect to exercise the right
---------------------
to purchase all or any portion of the shares of Executive Stock pursuant to the
Repurchase Option by delivering written notice (the "Repurchase Notice") to the
-----------------
holder or holders of the Executive Stock within 180 days of the Termination
Date. The Repurchase Notice will set forth the number of shares of Execu-
- 7 -
<PAGE>
tive Stock to be acquired from such holder(s), the aggregate consideration
to be paid for such shares and the time and place for the closing of the
transaction. If any Executive Stock is held by any transferees of Executive
or the IRA, the Company shall purchase the shares elected to be purchased from
such holder(s) of Executive Stock, pro rata according to the number of shares of
Executive Stock held by such holder(s) at the time of delivery of such
Repurchase Notice (determined as nearly as practicable to the nearest share). If
Executive Stock of different classes is to be purchased by the Company and
Executive Stock is held by any transferees of Executive or the IRA, the number
of shares of each class of Executive Stock to be purchased will be allocated
among such holders, pro rata according to the total number of shares of
Executive Stock to be purchased from such persons.
(e) Investor and Manager Rights.
---------------------------
(i) If for any reason the Company does not elect to purchase all of the
Executive Stock pursuant to the Repurchase Option prior to the 180th day
following the Termination Date, the Investors and the Managers will be entitled
to exercise the Repurchase Option, in the manner set forth in this paragraph 3,
for the Executive Stock the Company has not elected to purchase (the "Available
---------
Shares"). As soon as practicable, but in any event within thirty (30) days
- ------
after the Company determines that there will be any Available Shares, the
Company will deliver written notice (the "Option Notice") to the Investors and
-------------
the Managers setting forth the number of Available Shares and the price for each
Available Share.
(ii) Each of the Investors and the Managers will initially be permitted
to purchase its pro rata share (based upon the number of shares of Common Stock
then held by such Investors and Managers) of the Available Shares. Each Investor
and Manager may elect to purchase any number of the Available Shares (subject to
the preceding sentence) by delivering written notice to the Company within 30
days after receipt of the Option Notice from the Company (such 30-day period
being referred to herein as the "Election Period").
---------------
(iii) As soon as practicable but in any event within five (5) days after
the expiration of the Election Period, the Company will, if necessary, notify
the Investors and the Managers electing to purchase Available Shares of any
Available Shares which Investors and Managers have elected not to purchase and
each of the electing Investors and Managers will be entitled to purchase the
remaining Available Shares on the same terms as described above (the "Second
------
Option Notice"); provided that if in the aggregate such Investors and Managers
- -------------
elect to purchase more than the
- 8 -
<PAGE>
remaining Available Shares, such remaining Available Shares purchased by each
such Investor and Manager will be reduced on a pro rata basis based upon the
number of shares of Common Stock then held by such Investors and Managers. Each
Investor and Manager may elect to purchase any of the remaining Available Shares
available to such Investor and Manager by delivering written notice to the
Company within 10 days after the delivery of the Second Option Notice (with such
10-day period referred to herein as the "Second Election Period").
----------------------
(iv) As soon as practicable but in any event within five (5) business
days after the expiration of the Election Period or the Second Election Period
(if any) the Company will, if necessary, notify the holder(s) of Executive Stock
as to the number of shares of Executive Stock being purchased from the holder(s)
by the Investors and the Managers (the "Supplemental Repurchase Notice"). At the
------------------------------
time the Company delivers a Supplemental Repurchase Notice to the holder(s) of
Executive Stock, the Company will also deliver to each electing Investor and
Manager written notice setting forth the number of shares of Executive Stock the
Company and each Investor and Manager will acquire, the aggregate purchase price
to be paid and the time and place of the closing of the transaction.
(f) Closing. The closing of the transactions contemplated by this
-------
paragraph 3 will take place on the date designated by the Company in the
Repurchase Notice or the Supplemental Repurchase Notice, as the case may be,
which date will not be more than 90 days after the delivery of such notice. The
Company and/or the Investors and/or the Managers, as the case may be, will pay
for the Executive Stock to be purchased pursuant to the Repurchase Option by
delivery of, in the case of each Investor and Manager, a check payable to the
holder of such Executive Stock, and in the case of the Company (i) a check
payable to the holder of such Executive Stock, (ii) a note or notes payable in
three equal annual installments beginning on the first anniversary of the
closing of such purchase and bearing interest at a rate per annum equal to 8% or
(iii) both (i) and (ii) in the aggregate amount of the purchase price for such
shares. Any notes issued by the Company pursuant to this paragraph 3(f) shall
be subject to any restrictive covenants to which the Company is subject at the
time of such purchase. Notwithstanding anything to the contrary contained in
this Agreement, all repurchases of Executive Stock by the Company will be
subject to applicable restrictions contained in the Delaware General Corporation
Law and in the Company's and its Subsidiaries' debt and equity financing
agreements. If any such restrictions prohibit the repurchase of Executive Stock
hereunder which the Company is otherwise entitled to make, the Company may make
such repurchases as soon as it is permitted to do so under such restrictions.
The Company and/or the Investors and/or the
- 9 -
<PAGE>
Managers, as the case may be, will receive customary repre sentations and
warranties from each seller regarding the sale of the Executive Stock,
including, but not limited to, the representation that such seller has good
and marketable title to the Executive Stock to be transferred free and clear
of all liens, claims and other encumbrances.
(g) Executive's Undertaking. Executive will cause Executive's IRA to
-----------------------
take all actions necessary to consummate the closing of any transaction
contemplated by this paragraph 3.
(h) Termination of Repurchase Option. The provisions of this
--------------------------------
paragraph 3 will terminate upon the occurrence of an Acceleration Event (as
defined in Section 2(b)(ii) above).
4. Restrictions on Transfer.
------------------------
(a) Transfer of Executive Stock. Executive will not (and will not
---------------------------
permit the Trustee for Executive's IRA to) sell, pledge or otherwise transfer
any interest in any shares of Executive Stock, except pursuant to the provisions
of paragraphs 3, 4(b), 4(c), 7 or 8 hereof.
(b) Certain Permitted Transfers. The restrictions contained in this
---------------------------
paragraph 4 will not apply with respect to transfers of Executive Stock (i)
pursuant to applicable laws of descent and distribution, (ii) among Executive's
Family Group (as defined below) or (iii) by the IRA to Executive or members of
Executive's Family Group, provided that the restrictions contained in this
paragraph 4 will continue to be applicable to the Executive Stock after any such
transfer and the transferees of such Executive Stock shall agree in writing to
be bound by the provisions of this Agreement. "Family Group" means Executive's
------------
spouse and descendants (whether natural or adopted) and any trust solely for the
benefit of Executive and/or Executive's spouse and/or descendants. Any
transferee of Executive Stock pursuant to a transfer in accordance with the
provisions of this subparagraph 4(b) is herein referred to as a "Permitted
---------
Transferee." Upon the transfer of Executive Stock pursuant to this paragraph
- ----------
4(b), Executive will deliver a written notice (the "Transfer Notice") to the
---------------
Company. The Transfer Notice will disclose in reasonable detail the identity of
the Permitted Transferee(s).
(c) Participation Rights.
--------------------
(i) At least 30 days prior to any transfer of shares of any class of
Common Stock by an Investor (other than a transfer among the Investors or their
affiliates or to an employee of the Company or its Subsidiaries), the
transferring Investor will
- 10 -
<PAGE>
deliver written notice (the "Sale Notice") to the Company, Executive and all
-----------
other holders of such class of Common Stock that have been granted participation
rights similar to the participation rights granted herein (Executive and such
other holders of Common Stock with participation rights collectively referred to
as the "Other Stockholders"), specifying in reasonable detail the identity of
------------------
the prospective transferee(s) and the terms and conditions of the transfer.
Notwithstanding the restrictions contained in this paragraph 4, the Other
Stockholders may elect to participate in the contemplated transfer by delivering
written notice to the transferring Investor within 10 days after delivery of the
Sale Notice. If any Other Stockholders have elected to participate in such
transfer, each of the transferring Investor and such Other Stockholders will be
entitled to sell in the contemplated transfer, at the same price and on the same
terms, a number of shares of such class of Common Stock equal to the product of
(A) the quotient determined by dividing the number of shares of such class of
Common Stock owned by such person by the aggregate number of shares of such
class of Common Stock owned by the transferring Investor and the Other
Stockholders participating in such sale and (B) the number of shares of such
class of Common Stock to be sold in the contemplated transfer. Notwithstanding
the foregoing, in the event that the transferring Investor(s) intend to transfer
shares of more than one class of Common Stock, the Other Stockholders
participating in such transfer shall be required to sell in the contemplated
transfer a pro rata portion of shares of all such classes of Common Stock, which
portion shall be determined in the manner set forth immediately above.
For example (by way of illustration only), if the Sale Notice contemplated
-----------------------------------------
a sale of 100 shares of Class L Common by the transferring Investor, and if
the transferring Investor at such time owns 30% of the Class L Common and
if one Other Stockholder elects to participate and owns 20% of the Class L
Common, the transferring Investor would be entitled to sell 60 shares
(30% / 50% x 100 shares) and the Other Stockholder would be entitled to
sell 40 shares (20% / 50% x 100 shares).
(ii) The transferring Investor will use reasonable efforts to obtain the
agreement of the prospective transferee(s) to the participation of the Other
Stockholders in any contemplated transfer, and the transferring Investor will
not transfer any of its shares of Common Stock to the prospective transferee(s)
unless (A) simultaneously with such transfer, the prospective transferee or
transferees purchase from the Other Stockholders the shares of Common Stock
which the Other Stockholders are entitled to sell to such prospective
transferee(s) pursuant to paragraph 4(c)(i) above or (B) simultaneously with
such transfer, the transferring Investor
- 11 -
<PAGE>
purchases the number of shares of such class of Common Stock from the Other
Stockholders which the Other Stockholders would have been entitled to sell
pursuant to paragraph 4(c)(i) above.
(d) Termination of Transfer Restrictions. The provisions of this
------------------------------------
paragraph 4 will terminate upon the occurrence of an Acceleration Event.
5. Additional Restrictions on Transfer.
-----------------------------------
(a) The certificates representing the Executive Stock and Option Shares
will bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFI CATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION
THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO
SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE
OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A MANAGEMENT
AGREEMENT BETWEEN THE ISSUER (THE "COMPANY") AND AN EMPLOYEE OF THE
COMPANY DATED AS OF APRIL 5, 1996, A COPY OF WHICH MAY BE OBTAINED BY
THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT
CHARGE."
(b) No holder of Executive Stock or Options Shares may sell, transfer or
dispose of any Executive Stock or Option Shares (except pursuant to an effective
registration statement under the Securities Act of 1933) without first
delivering to the Company an opinion of counsel reasonably acceptable in form
and substance to the Company (which counsel shall be reasonably acceptable to
the Company) that registration under the 1933 Act is not required in connection
with such transfer.
6. Definition of Executive Stock and Option Shares. For all purposes
-----------------------------------------------
of this Agreement, Executive Stock and Option Shares will continue to be
Executive Stock and Option Shares in the hands of any holder other than
Executive or the IRA, as the case may be, (except for the Company, the Investors
or purchasers pursuant to an offering registered under the 1933 Act or
purchasers pursuant to a Rule 144 transaction (other than a Rule 144(k)
transaction occurring prior to the time of a closing of a Public Offering (as
- 12 -
<PAGE>
defined in Section 8 below)), and each such other holder of Executive Stock and
Option Shares will succeed to all rights and obligations attributable to
Executive as a holder of Executive Stock and Option Shares hereunder. Executive
Stock and Option Shares will also include shares of the Company's capital stock
issued with respect to shares of Executive Stock and Option Shares by way of a
stock split, stock dividend or other recapitalization.
7. Sale of the Company
-------------------
(a) If the holders of a majority of the shares of Common Stock held by
the Investors approve (and, in the case of any sale or other fundamental change
which requires the approval of the board of directors of a Delaware corporation
pursuant to the Delaware General Corporation Law, the Board shall have approved
such sale) a sale of all or substantially all of the Company's assets determined
on a consolidated basis or a sale of all or substantially all of the Company's
outstanding capital stock (whether by merger, recapitalization, consolidation,
reorganization, combination or otherwise) to an Independent Third Party or group
of Independent Third Parties (an "Approved Sale"), each holder of Executive
-------------
Stock or Option Shares will vote for, consent to and raise no objections against
such Approved Sale. If the Approved Sale is structured as (i) a merger or
consolidation, each holder of Executive Stock or Options Shares will waive any
dissenters' rights, appraisal rights or similar rights in connection with such
merger or consolidation or (ii) sale of stock, each holder of Executive Stock or
Option Shares will agree to sell all of his shares of Executive Stock or Options
Shares and rights to acquire shares of Executive Stock or Option Shares on the
terms and conditions approved by the Board and the holders of a majority of the
Common Stock then outstanding. Each holder of Executive Stock or Option Shares
will take all necessary or desirable actions in connection with the consummation
of the Approved Sale as requested by the Company.
(b) The obligations of the holders of Common Stock with respect to the
Approved Sale of the Company are subject to the satisfaction of the following
conditions: (i) upon the consummation of the Approved Sale, each holder of
Common Stock will receive the same form of consideration and the same portion of
the aggregate consideration that such holders of Common Stock would have
received if such aggregate consideration had been distributed by the Company in
complete liquidation pursuant to the rights and preferences set forth in the
Company's Certificate of Incorporation as in effect immediately prior to such
Approved Sale; (ii) if any holders of a class of Common Stock are given an
option as to the form and amount of consideration to be received, each holder of
such class of Common Stock will be given the same option; and (iii) each holder
- 13 -
<PAGE>
of then currently exercisable rights to acquire shares of a class of Common
Stock will be given an opportunity to exercise such rights prior to the
consummation of the Approved Sale and participate in such sale as holders of
such class of Common Stock.
(c) If the Company or the holders of the Company's securities enter into
any negotiation or transaction for which Rule 506 (or any similar rule then in
effect) promulgated by the Securities Exchange Commission may be available with
respect to such negotiation or transaction (including a merger, consolidation or
other reorganization), the holders of Executive Stock and Option Shares will, at
the request of the Company, appoint a purchaser representative (as such term is
defined in Rule 501) reasonably acceptable to the Company. If any holder of
Executive Stock or Option Shares appoints a purchaser representative designated
by the Company, the Company will pay the fees of such purchaser representative,
but if any holder of Executive Stock or Option Shares declines to appoint the
purchaser representative designated by the Company, such holder will appoint
another purchaser representative, and such holder will be responsible for the
fees of the purchaser representative so appointed.
(d) Executive and the other holders of Executive Stock and Option Shares
(if any) will bear their pro-rata share (based upon the number of shares sold)
of the costs of any sale of Executive Stock and Option Shares pursuant to an
Approved Sale to the extent such costs are incurred for the benefit of all
holders of Common Stock and are not otherwise paid by the Company or the
acquiring party. Costs incurred by Executive and the other holders of Executive
Stock and Option Shares on their own behalf will not be considered costs of the
transaction hereunder.
(e) The provisions of this paragraph 7 will terminate upon the closing of
a Public Offering (as defined below).
8. Public Offering. In the event that the Board and the holders of a
---------------
majority of the shares of Common Stock then outstanding approve an initial
public offering and sale of Common Stock (a "Public Offering") pursuant to an
---------------
effective registration statement under the 1933 Act, the holders of Executive
Stock and Option Shares will take all necessary or desirable actions in
connection with the consummation of the Public Offering. In the event that such
Public Offering is an underwritten offering and the managing underwriters advise
the Company in writing that in their opinion the Common Stock structure will
adversely affect the marketability of the offering, each holder of Executive
Stock and Option Shares will consent to and vote for a recapitalization,
reorganization and/or exchange of the Common Stock into securities that the
managing underwriters, the Board and holders of a majority
- 14 -
<PAGE>
of the shares of Common Stock then outstanding find acceptable and will take all
necessary or desirable actions in connection with the consummation of the
recapitalization, reorganization and/or exchange.
9. Notices. Any notice provided for in this Agreement must be in
-------
writing and must be personally delivered, received by certified mail, return
receipt requested, or sent by guaranteed overnight delivery service, to the
Investors and the Managers at the addresses indicated in the Company's records
and to the other recipients at the address indicated below:
To the Company:
Wesley-Jessen Holding, Inc.
c/o Bain Capital, Inc.
Two Copley Place
Boston, Massachusetts 02116
Attn: Steven G. Pagliuca
Adam W. Kirsch
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Jeffrey C. Hammes
Gary M. Holihan
To Executive:
Kevin Ryan
1501 East Central Road
#317
Arlington Heights, Illinois 60005
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or mailed.
10. Severability. Whenever possible, each provision of this
------------
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision
- 15 -
<PAGE>
in any other jurisdiction, and this Agreement will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein.
11. Complete Agreement. This Agreement embodies the complete
------------------
agreement and understanding among the parties and supersedes and preempts any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
12. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which will be deemed to be an original and all of which
taken together will constitute one and the same agreement.
13. Successors and Assigns. This Agreement is intended to bind and
----------------------
inure to the benefit of and be enforceable by Executive, the Company, the
Investors, the Managers and their respective successors and assigns, provided
that Executive may not assign any of his rights or obligations, except as
expressly provided by the terms of this Agreement.
14. Governing Law. The corporate law of the State of Delaware shall
-------------
govern all questions concerning the relative rights of the Company and its
stockholders. All other issues concerning the enforceability, validity and
binding effect of this Agreement will be governed by and construed in accordance
with the laws of the State of Illinois, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of Illinois or
any other jurisdiction) that would cause the application of the law of any
jurisdiction other than the State of Illinois.
15. Remedies. The parties hereto acknowledge and agree that money
--------
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party hereto will have the right to injunctive relief, in
addition to all of its other rights and remedies at law or in equity, to enforce
the provisions of this Agreement.
16. Effect of Transfers in Violation of Agreement. The Company will
----------------------------------------------
not be required (a) to transfer on its books any shares of Executive Stock or
Option Shares which have been sold or transferred in violation of any of the
provisions set forth in this Agreement or (b) to treat as owner of such shares,
to accord the right to vote as such owner or to pay dividends to any transferee
- 16 -
<PAGE>
to whom such shares have been transferred in violation of this Agreement.
17. Amendments and Waivers. Any provision of this Agreement may be
----------------------
amended or waived only with the prior written consent of the Company, the
Investors and the Managers who hold 70% of the Common Stock held by the
Investors and the Managers, and Executive; provided, however, that in the event
that such amendment or waiver would adversely affect an Investor, a Manager or a
group of Investors or Managers in a manner different than any other Investor or
Manager, then such amendment or waiver will require the consent of such Investor
or Manager or a majority of the Common Shares held by such group of Investors or
Managers adversely affected.
18. Third Party Beneficiaries. The parties hereto acknowledge and
-------------------------
agree that the Investors and the Managers are third party beneficiaries of this
Agreement. This Agreement will inure to the benefit of and be enforceable by
the Investors and the Managers and their respective successors and assigns.
19. Wesley-Jessen Holding, Inc. 1995 Stock Purchase and Option Plan.
---------------------------------------------------------------
The issuance of Executive Stock and the grant of the Options hereunder is
pursuant to, and subject to all the terms and conditions of the Plan, attached
hereto as Exhibit B.
---------
* * * * *
- 17 -
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
WESLEY-JESSEN HOLDING, INC.
By: President
--------------------------------
Title:
Kevin Ryan
------------------------------------
KEVIN RYAN
- 18 -
<PAGE>
SCHEDULE - TERMS FOR OTHER NAMED EXECUTIVES
1) Edward J. Kelley:
-----------------
a) Number of Shares purchased:
Common L- 2,500
Common- 22,500
b) Time Options exercisable at $0.08059/share:
Number- 25,000
Vest- Over 4 years in equal installments
beginning June 28, 1996
c) Options immediately exercisable at $3.70/share:
Number- 25,000
d) Options immediately exercisable at $7.33/share:
Number- 25,000
2) Lawrence L. Chapoy:
-------------------
a) Number of Shares purchased:
Common L- 357
Common- 3,214
b) Time Options exercisable at $0.08059 per share:
Number- 7,143
Vest- Over 5 years in equal installments
beginning June 28, 1996.
c) Options immediately exercisable at $3.70/share:
Number- 7,143
d) Options immediately exercisable at $7.33/share:
Number- 7,143
3) Daniel M. Roussel:
------------------
a) Number of Shares purchased:
Common L- 714
Common- 6,428
b) Time Options exercisable at $0.08059/share:
Number- 14,286
Vest- Over 5 years in equal installments
beginning June 28, 1996.
c) Options immediately exercisable at $3.70/share:
Number- 14,286
d) Options immediately exercisable at $7.33/share:
Number- 14,286
4) Thomas F. Steiner:
------------------
a) Number of Shares purchased:
Common L- 536
Common- 4,822
b) Time Options exercisable at $0.08059/share:
Number- 10,714
Vest- Over 5 years in equal installments
beginning June 28, 1996.
c) Options immediately exercisable at $3.70/share:
Number- 10,714
d) Options immediately exercisable at $7.33/share:
Number- 10,714
<PAGE>
Exhibit 21.1
LIST OF SUBSIDIARIES
The following sets forth all of the direct and indirect subsidiaries of
Wesley-Jessen Holding, Inc. If indented, the corporation is a wholly owned
subsidiary of the corporation under which it is listed.
<TABLE>
<CAPTION>
SUBSIDIARY JURISDICTION
---------- --------------
<S> <C>
Wesley-Jessen Corporation Delaware
Wesley-Jessen (Puerto Rico), Inc. Delaware
Wesley-Jessen Limited United Kingdom
WJ/PBH (Services) Limited United Kingdom
WJ/PBH Limited United Kingdom
PBH Diffractive Lenses Limited United Kingdom
Wesley-Jessen (Canada), Inc. Canada
PBH, Inc. Delaware
PBH International, Inc. Delaware
PBH Japan K.K. Japan
Barnes-Hind International, Inc. Delaware
PBH Pty Ltd. Spain
Barnes-Hind Spain, S.A. Australia
PBH (France), S.A. France
Wesley-Jessen S.A. Spain
Wesley-Jessen S.p.A. Italy
PBH S.p.A. Italy
Wesley-Jessen (Japan) K.K. Japan
Wesley-Jessen S.A.R.L. France
PBH Nederland B.V. Netherands
PBH N.V. Belgium
Wesley-Jessen GmbH Germany
</TABLE>
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our reports dated December 4, 1996 and
September 17, 1996, relating to the financial statements of Wesley-Jessen
Holding, Inc. (to be renamed Wesley Jessen Vision Care, Inc.) and its
Predecessor (the Wesley-Jessen contact lens business of Schering-Plough
Corporation), respectively, which appear in such Prospectus. We also consent
to the application of such reports to the Financial Statement Schedule for the
periods from January 1, 1993 through September 28, 1996 listed under
Item 16(b) of this Registration Statement when such schedule is read in
conjunction with the financial statements referred to in our reports. The
audits referred to in such reports also included this schedule. We also
consent to the references to us under the headings "Experts," and "Selected
Historical Consolidated Financial Data" in such Prospectus. However, it should
be noted that Price Waterhouse LLP has not prepared or certified such
"Selected Historical Consolidated Financial Data."
PRICE WATERHOUSE LLP
Chicago, Illinois
December 4, 1996
<PAGE>
EXHIBIT NO. 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of
our report dated July 26, 1996, on our audits of the financial statements of
Pilkington Barnes Hind Group. We also consent to the reference to our firm
under the caption "Experts."
Coopers & Lybrand L.L.P.
San Jose, California
December 4, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM S-1
REGISTRATION STATEMENT FOR WESLEY-JESSEN HOLDING, INC. (TO BE RENAMED
WESLEY-JESSEN CORPORATION) AND IS QUALIFIED IN ITS ENTIRETY BE REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 SEP-30-1996
<PERIOD-START> JUN-29-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 SEP-28-1996
<CASH> 2,522 7,836
<SECURITIES> 0 0
<RECEIVABLES> 33,292 30,209
<ALLOWANCES> 11,900 11,700
<INVENTORY> 25,654 14,020
<CURRENT-ASSETS> 58,921 51,759
<PP&E> 893 4,787
<DEPRECIATION> 0 200
<TOTAL-ASSETS> 67,330 63,243
<CURRENT-LIABILITIES> 28,659 30,027
<BONDS> 50,861<F1> 37,273<F1>
0 0
0 0
<COMMON> 42 42
<OTHER-SE> (12,232) (4,099)
<TOTAL-LIABILITY-AND-EQUITY> 67,330 63,243
<SALES> 54,315 96,048
<TOTAL-REVENUES> 54,315 99,548
<CGS> 53,845 33,097
<TOTAL-COSTS> 31,608 54,212
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 1,235 1,020
<INTEREST-EXPENSE> 2,599 2,757
<INCOME-PRETAX> (33,737) 9,482
<INCOME-TAX> (14,022)<F2> 1,621
<INCOME-CONTINUING> (31,138) 8,739
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (19,715) 7,861
<EPS-PRIMARY> 0<F3> 0<F3>
<EPS-DILUTED> 0<F3> 0<F3>
<FN>
<F1>THIS LINE ITEM INCLUDES $11,361 AT DEC 31, 199 AND $10,773 AT SEP 28, 1996
OF NEGATIVE GOODWILL.
<F2>INCOME TAX BENEFIT FOR DEC 31, 1995.
<F3>PRIOR TO THE COMPLETION OF THE FORM S-1 REGISTRATION STATEMENT,AS STOCKS OF
ALL OUTSTANDING SHARES OF COMMON STOCK WILL BE EFFECTED. DATA NOT YET
MEANINGFUL.
</FN>
</TABLE>
